CPI estimates show negative rate for first time since 2009

Prices fell in October, but deflation not yet an issue for the Spanish economy

The specter of deflation in the Spanish economy has returned. Prices have fallen in October, with the estimated annual inflation rate for the month at -0.1 percent. If the data is confirmed, it would mean the first negative Consumer Price Index (CPI) rate since October 2009, when the figure was -0.7 percent.

The advance CPI data released on Wednesday by the National Statistics Institute (INE) is usually accurate to within 0.1 percentage points of the official figure, which will be released in two weeks.

Although the CPI is showing a fall in prices for October, it is too early to talk about deflation in the Spanish economy. To be considered as such, the fall in prices would have to be registered for a prolonged period of time.

Compared to the month before, the CPI rose in October 0.4 percent, while it fell 0.1 percent compared to the same month in 2012. According to the INE, this fall is due mostly to cheaper food and non-alcoholic drinks, as well as the loss of the effect of a major hike in university fees, which was introduced in the same month last year. While fees have gone up this year as well, the rise was lower than that seen in 2012.

The INE also released advance data for the harmonized consumer price index, which is used for comparative purposes with regard to the rest of the euro zone. The inter-annual rate slowed to 0.1 percent for October, compared to 0.5 percent in September.

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