Drop in Spanish Inflation Rate in May Raise Hopes for Nation’s Economy
2011-05-30 14:31:06
Spain’s May inflation rate was slightly lower than a month earlier, fueling hopes that prices will stabilize and support consumer spending.
Consumer prices, based on European Union calculations, rose 3.4 percent from a year earlier, the National Statistics Institute said today. Prices in April gained 3.5 percent, the most since October 2008. Inflation was 3.5 percent according to the Spanish measure of prices, the institute said.
“This is good news because a moderated inflation will help consumer spending, at a time when the economy is relying more on exports to grow,” said Jose Carlos Diez, chief economist at Intermoney Valores in Madrid. Oil costs and the euro exchange rate will determine whether prices continue to increase more slowly in the coming months, he said.
The European Central Bank is “carefully” monitoring inflation risks to avoid commodity prices affecting wage demands and other costs, President Jean-Claude Trichet said on May 26. Spanish inflation has accelerated more than in the euro region overall, spurred by a 35 percent surge in oil prices in the past year, even as the economy struggles to emerge from a recession with a 21 percent jobless rate.
Spain is more sensitive to changes in the cost of oil than other euro-area countries because the economy is very energy- intensive. It’s “logical” to expect the nation’s inflation rate to fall below the regional average next year, Bank of Spain Governor Miguel Angel Fernandez Ordonez said on May 23. The government also forecasts inflation will slow starting in June or July, Deputy Finance Minister Jose Manuel Campa said last month.