Spain inflation hits zero for first time in four years

Spanish inflation slowed to zero in October, official data showed, in line with falling rates around Europe which have raised the risk of deflation that could threaten economic recovery.

Spain inflation hits zero for first time in four years
The slowing of inflation in Spain was led by lower prices in communications, transport, education, food and alcoholic drinks.Photo: Gerard Julien/AFP

Spain's inflation rate, a measure of the rise in consumer prices, slowed by half a percentage point from the previous month to zero in October, the National Statistics Institute said.

That figure was harmonized with the European Union's own data. Spain's own non-harmonized figure, which serves as its reference, indicated a negative inflation rate of 0.1 percent in October.

The slowing of the rise in consumer prices in the euro zone's fourth-biggest economy mirrored slowing inflation rates in Germany and several other European countries.

Overall inflation in the eurozone slowed to 0.7 percent in October, its lowest rate since 2009.

In Spain the underlying inflation rate, which strips out the effect of volatile prices for goods such as energy, reached an even lower level of 0.2 percent compared to the same period a year earlier.

The statistics institute said the slowing of inflation in Spain, which is timidly emerging from a two-year recession, was led by lower prices in communications, transport, education, food and alcoholic drinks.

Economists warn that if the trend continues and prices actually start to fall overall and in a lasting way, the economy can slow in a vicious cycle known as deflation.

The European Central Bank defines price stability as increases of just below 2.0 percent in its harmonized inflation yardstick.

The bank's chairman Mario Draghi warned last week that the euro zone might be facing a prolonged period of low inflation, but said he did not foresee deflation.

Spain last saw deflation in 2009, when prices fell for eight months in a row.

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Spain’s inflation soars to 29-year high

Spanish inflation accelerated in November to its highest level in nearly three decades on the back of rising food and gas prices, official data showed Monday.

black friday spain
Black Friday sales can't disguise the fact for shoppers that life in Spain is getting increasingly expensive. Photo: GABRIEL BOUYS / AFP

Consumer prices jumped by 5.6 percent, up from a 5.4 percent increase in October, according to preliminary figures from national statistics institute.

That is its fastest pace since September 1992, when the rate was 5.8 percent.

The surge in inflation in the eurozone’s fourth-largest economy was due largely to a spike in food prices, followed by higher gas prices, the statistics office said.

Electricity costs, however, declined slightly after a month-long acceleration, it added.

As in other European Union nations, inflation in Spain has risen since the start of the year after consumer prices declined during most of 2020 due to the economic impact of pandemic lockdowns.

In October, eurozone inflation reached 4.1 percent, well above the European Central Bank’s target of two percent and equal to a high set in July 2008.

But the bank believes eurozone inflation will peak in November and is set to gradually slow next year as supply bottlenecks and the energy crunch ease, board member Isabel Schnabel said earlier this month.

Investors worry central banks will withdraw their stimulus measures sooner than expected to tame inflation.