Spain inflation slows in June

 

Inflation in Spain eased in June for the second consecutive month in June, largely due to falling energy and tobacco prices, though it remained above the euro zone average.

A report released by the National Institute of Statistics (INE) revealed how consumer prices increased by 3.2 % year-on-year in June, in line with earlier forcasts, and down from 3.5% in May.

Central government increased the rate of IVA in July of last year from 16% to 18% as part of the country's austerity measures in an effort to improve market confidence over escalating public deficit.

Inflation in Spain is still higher than the euro zone average due to the country's high dependence on imported oil.

Today's release of Euro zone data is expected to confirm the bloc's inflation was 2.7% in June, still above the ECB's ceiling of 2%. The ECB has raised interest rates twice this year from a record low of 1.0% after last month's increase to 1.5% indicated more tightening is likely later in the year.

Spanish consumer prices for June rose on an EU-harmonised basis by 3.0% year-on-year compared to 3.4% in May. The data showed significant falls last month in alcohol and tobacco prices, together with transport costs, in line with a fall in the cost of fuel.

The report also showed core inflation, which removes food and energy prices, was 1.7%, down from 2.1% last month.