This is not good news at all. According to a flash estimate released by the Spanish national statistice office (INE) today (and confirmed on April 11, update. In addition the month-on-month inflation was estimated at 0.9% in the detailed release) the European Union standardised HICP annual inflation rate is expected to be 4.6% in March 2008. This flash reading provides a preview of the HICP that, if confirmed, would imply a two-tenths increase in the annual inflation rate in March, since in Febuary this change was 4.4%. The final reading will be published on 11 April. In the meantime what seems clear is that the Spanish economy is slowing rapidly even as inflation accelerates, and this will create a major headache for ratesetters over at the ECB, since with inflation accelerating in this way in several key eurozone countries (Italy is the other obvious case) it will be very hard indeed to justify any rate cut in the short term.
Underlying inflation in Spain accelerated in March to the fastest pace in more than five years as processed food and clothing prices rose.
Core consumer prices, which exclude energy and fresh food, rose 3.4 percent from a year earlier after gaining 3.3 percent in February, the National Statistics Institute in Madrid said today in a statement. The rate was the highest since December 2002
Bread and dairy products were both 11 percent higher on the year and children's clothes were 4.6 percent higher than the previous month, the report said.
In further news at the end of the week the IMF have now forecast that the Spanish economy is likely to grow by 1.8 percent this year, half the 3.8 percent expansion of 2007. The jump in credit costs stemming from the U.S. housing crash is exacerbating Spain's own property slump and weighing on spending the IMF said.