Spanish Underlying Inflation Slows as Economy Contracts

 

Spain's underlying inflation rate slowed in January as the economy edged closer to a second recession in two years.

Core consumer prices, which exclude energy and fresh food, gained 1.3% from a year earlier, compared with 1.5% in December, the National Statistics Institute in Madrid (INE) said today. Headline inflation, based on EU calculations, was 2%, matching an initial estimate on Jan. 31. Spain's economy may shrink 1.5% this year, the Bank of Spain estimates, as the government tightens its budget for the third year. The deepest credit squeeze on record and the 23% unemployment rate, the European Union's highest, are also crimping household spending.

Spanish inflation, which outpaced the euro-region average for most of the past decade, is now lower than the European rate. Euro-region inflation was 2.7% in January, the European Union's statistics office said on Feb. 1.