Inflation adds to Spanish woes with jump to 2.7 pct

Prices could well rise further from September 1 when value-added tax rises to 21 percent from 18 percent, raising prices for consumers already struggling under the weight of falling wages and unemployment of almost 25 percent.

Inflation adds to Spanish woes with jump to 2.7 pct

World Bulletin / News Desk

Spanish consumer prices surged in August driven by higher fuel costs and a value-added tax hike in September could drive another jump, complicating Spain's efforts to get out of recession and generate the growth needed to reduce its debts.

EU-harmonised consumer prices rose by 2.7 percent year-on-year in August, flash data from the National Statistics Institute (INE) showed on Thursday, up from 2.2 percent in July and much higher than a market consensus for an unchanged reading.

Prices could well rise further from September 1 when value-added tax rises to 21 percent from 18 percent, raising prices for consumers already struggling under the weight of falling wages and unemployment of almost 25 percent.

Spain also depends on imports for some 70 percent of its energy needs, meaning higher fuel prices raise costs for businesses.

"We can see an energy cost effect here, but it might also be that some businesses have raised prices on products before the September VAT hike, so they can then say they haven't raised prices when it happens," said Nicolas Lopez, economist at M&G Valores.

He said inflation could rise as high as 3.7 percent in September.

Spain's inflation figures come before those for the wider euro zone on Friday, which should show inflation at 2.5 percent in August, faster than the 2.4 percent rate seen in July.

That would be some way above the European Central Bank's inflation target of close to 2 percent.

INE data also showed Spain's national consumer price index rose by 2.7 percent in August on an annual basis, up from 2.2 percent in July.

Last Mod: 30 Ağustos 2012, 12:56
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