The rate of inflation as measured by Spain's consumer price index was up again in May, at 4.7% according to the flash estimate, while the producer price index rose at a 7.2% annual rate in April according to the latest data from the National Statistics Office (INE). This situation is now most difficult since the economy is evidently slowing rapidly (see the most recent retail sales, industrial output and new mortgages data which are in the posts which accompany this one) yet inflation is actually accelerating. Spain is now entering a period of very pronounced stagflation with little certainty over the likely short term evolution of this whole situation. ie things are obviously going to get worse, but how much worse and how rapidly, and when the inflation eventually buckles under the weight, what will then happen to prices if the euro remains strong? As I say, a lot of unknowns here.
The HICP annual inflation is expected to be 4.7% in May 2008, according to the flash estimated issued by the INE. This index provides a preview of the HICP that, if confirmed, would imply a five-tenths increase on the annual rate, since in April this change was 4.2%. The INE issues this indicator with the aim of incorporating it into the calculation of the HICP flash estimated of the European Monetary Union (EMU) published by Eurostat. Obtaining this EMU flash estimated forms part of the Eurostat and European Central Bank policy of offering timely and quality data that is comparable with that produced by the United States.
In April, the Spanish Producer Price Index registered a 0.8% increase with respect to the month of March 2008 and an increase of 7.2% with respect to April 2007. The activities that most influenced this variation were Manufacture of coke and refined petroleum products (28.8%) and Food and beverage products industry (10.5%). By economic destination of the goods, the variation rates as compared with the same month the previous year were 5.3% for consumer goods (3.2% for durable consumer goods and 5.5% for non-durable consumer goods), 2.2% for capital goods, 6.0% for intermediate goods and 16.5% for energy.