Overseas property news - Spain's inflation ‘oxygen bubble'

Spain's inflation ‘oxygen bubble'

Spanish inflation fell to 0.8 percent in January, the lowest level since June 1969, official data showed on Friday...

The figures from the statistics institute INE showed that this was the sixth month running of declining 12-month inflation in Spain, which entered its first recession for 15 years in the second half of 2008.

Prices fell by 1.3 percent in January from the price level in December, on a European Union harmonised basis, owing largely to the impact of the start of the winter sales period which lowered prices especially for clothes and shoes.

Labour Minister Celestino Corbacho told public radio RNE the drop in inflation would provide an "oxygen bubble" to households which would be able to consume "in better conditions" because of the drop in prices.

Soft drop

The figures confirmed a preliminary estimate issued on January 30 by the statistics office. At the time the government ruled out the risk of deflation, a sustained fall in prices, is seen as a danger to the economy as it can lead consumers and companies to hold back on spending as they wait for even cheaper prices.

"We do not contemplate that scenario, what will happen is a soft drop in prices over the coming months," Deputy Prime Minister Maria Teresa de la Vega told reporters after the estimate for January inflation was released.

Twelve-month inflation rate has fallen each month after hitting 5.3 percent in July, which was the highest since January 1997, due to the abrupt economic slowdown and lower oil prices.

In November, Economy Minister Pedro Solbes forecast that inflation would probably slow to about 2.0 percent in December and continue to fall to below 1.0 percent by July 2009.

 

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