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Spain inflation likely to average zero in 2015

Source: Reuters - Sun 14th Dec 2014
Spain inflation likely to average zero in 2015

Inflation will likely remain around zero in Spain through 2015 as a whole, Economy Minister Luis de Guindos was quoted saying, dismissing the chances of a slide into a deflationary spiral and arguing low prices were helping an economic recovery.

Spanish consumer prices fell 0.4 percent year-on-year in November, official data showed on Friday, their fifth straight month in negative territory.

But the government points to an upturn in consumer expenditure as evidence that a longer-term deflationary trend, marked by people deferring purchases in the expectation of yet lower prices in future, has yet to take hold.

"Next year inflation will probably, on average, be zero," Luis de Guindos told ABC newspaper. He said prices would stay negative for several months, but said spending was rising, meaning households were not putting off buying decisions despite an erosion of wages after a deep economic crisis.

De Guindos added that the government's forecast for 2 percent economic growth in Spain in 2015 was "conservative".

Savings on energy, a weaker euro which is helping exports and a pick-up in new lending to the economy were aiding the turnaround, he said, despite a slowdown among European partners which poses a risk for Spain.

Falling oil prices are particularly affecting Spain, which is strongly dependent on energy imports. The Bank of Spain had initially projected consumer prices could end the year in positive territory, as Spain's economy begins to grow again at one of the fastest rates in the euro zone.

The European Central Bank (ECB) should decide early next year whether to boost efforts to tackle low inflation and faltering growth across the euro zone, with falling consumer prices adding to pressure for it to act.

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