World Economy

Prices in Spain Fall for 5th Straight Month

Prices in Spain Fall for 5th Straight MonthPrices in Spain Fall for 5th Straight Month

Spanish consumer prices fell for the fifth straight month in November, official figures showed on Thursday, amid concern that the eurozone is at risk of sliding into deflation.

Spain’s EU-harmonized inflation rate was minus 0.5 percent in November on a seasonally adjusted basis, following a 0.2 percent fall in October, preliminary figures from the national statistics institute showed, Reuters reported.

“This decline was caused, almost entirely, by a drop in energy prices (electricity and gasoline),” the statistics office said in a statement.

Consumer prices in the eurozone’s fourth-largest economy fell by 0.3 percent in September, by 0.5 percent in August and by 0.4 percent in July.

Falling prices reflect weak domestic demand in Spain, still struggling with a 23.67-percent jobless rate, one of the highest unemployment rates in the industrialized world, even as the economy slowly expands after emerging gingerly in mid-2013 from a double-dip recession.

While falling prices may sound good for consumers, deflation can trigger a vicious spiral in which businesses and households delay purchases, throttling

demand and causing companies to lay off workers.

The European Commission predicts prices will rise by just 0.5 percent this year in the eurozone and by 0.8 percent next year.

The European Central Bank (ECB) aims at inflation rates of just below 2.0 percent over the medium term.

Bank of Spain governor Luis Maria Linde said Tuesday that the country “faced the danger of very low growth and inflation during a long time, as happened in Japan” but there were no signs of deflation or a return to recession.

 A Rebound

Spain emerged from a deep recession last year to become one of the fastest growing economies in the eurozone, and its output expanded for the fifth quarter in a row in the July-September period, separate data from INE confirmed on Thursday.

A rebound in domestic demand has partly helped the country weather an economic slowdown among major trade partners in the eurozone, which has dampened Spain’s export growth this year.

Spanish gross domestic product grew 0.5 percent quarter-on-quarter in the third quarter, the data showed, in line with preliminary readings. Quarterly GDP growth in the April-June quarter was revised downwards to 0.5 percent, INE said, from an earlier reading of 0.6 percent.

But the country may not stay immune to the broader euro zone slowdown for long, and some economists believe the pace of Spain’s recovery is weakening.