Inflation turns negative for first time since 2009

Consumer prices last fell on an annual basis during the “Great Recession”

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Food market in Valencia.
Food market in Valencia.EFE

Consumer price inflation turned negative in October for the first time in four years, highlighting the possible risk of deflation facing the country.

The last time inflation was negative was in October 2009 when Spain was still in the grip of what has come to be known as the Great Recession. The economy that year shrank 3.7 percent in what was the worst annual economic downturn Spain had experienced in some 80 years.

The National Statistics Institute (INE) on Wednesday confirmed that the consumer price index declined an annual 0.1 percent last month after rising 0.3 percent in September. On a monthly basis, the index was up 0.2 percent.

Core, or underlying inflation, which factors out volatile fresh food and energy product prices slowed to 0.2 percent from 0.8 percent in September.

Inflation’s move into negative territory was largely explained by falls in food and non-alcoholic drink prices, with one out of every three products that make up the consumer basket cheaper than a year ago.

Of the 57 items the INE monitors on a monthly basis, 17 were priced lower than in October of last year. Fresh vegetables were down 5.8 percent, while sugar and eggs fell 3.3 and 3.1 percent respectively.

Wages in Spain are also falling as a result of a process known as internal depreciation in order to boost the country’s competitiveness.

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