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Spanish inflation and jobless rates jump in Dec
MADRID - Spanish consumer price inflation jumped to 0.9 percent in December and may have further to rise before a weak economy and the impact of growing unemployment drags it back down.
- PUBLISHED: Tue 5 Jan 2010, 5:54 PM UPDATED: Mon 6 Apr 2015, 10:23 AM
Boosted by year-on-year rises in volatile energy prices, the rise was just above a Reuters forecast of 0.8 percent and up on the 0.4 percent increase in November, National Statistics Institute data on Tuesday showed.
But, while crude oil outweighed the effects of recession in prices, one of Europe's worst performing economies left its mark on jobless queues.
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The Labour Ministry said the number of people registered as jobless hit 3.9 million in December, up 54,657 from the month before. Jobless claims had risen by a similar number in November.
That is well above the 3.4 million jobless in Germany, a country with a population nearly twice the size of Spain.
While its big euro zone contemporaries have emerged from recession, Spain's economy is still contracting and likely shrank 3.6 percent last year, according to the government, and has been shrinking for six straight quarters,
After a decade during which Spanish consumers and companies had their fill of foreign credit, its overdependence on a collapsing property sector have crippled domestic demand while the strong euro has made exporters much less competitive.
While crude prices will also feed inflation for a while, the weak economy could push inflation down again later in the year, according to Royal Bank of Scotland analyst Silvio Peruzzo.
“We look for an even steeper increase in headline inflation in January, that will jump significantly above 1.0 percent,” he said.
“That trend will continue for the first couple of months of the second quarter of 2010 and from that point on we expect inflation will partially retreat,” Peruzzo said.
Price risks
Before November inflation had held in negative territory for eight consecutive months and some economists still warn of a potential slide back into deflation, a persistent and widespread fall in prices that can cripple an economy for years.
December inflation was in line with the euro zone as a whole, but Spanish prices may diverge from other euro zone members later in the year, as the European Central Bank moves towards withdrawing policy stimulus.
“We will see the headline rate inch back down again over the course of this year and indeed there is a real risk of deflation in Spain,” said Ben May at Capital Economics. “These temporary energy effects will begin to unwind soon.”
The government said its focus remained on bringing down unemployment levels this year.
“2009 has been a very difficult year ... The government's main worry and objective is to bring down unemployment throughout 2010,” said Employment Secretary General Maravillas Rojo in a statement.
The government injected 8 billion euros into the economy last year to create more than 400,000 mostly low-skilled jobs. A further 5 billion euro stimulus package for 2010 will also be launched, but aimed at sustainable long-term growth sectors.
Data showed construction was the worst affected sector in December, with an increase of 7.5 percent in the jobless rate compared with the same month a year ago.