Spanish inflation below 2 per cent

Spain's inflation rate fell below 2 per cent for the first time since August 2010 last month, reflecting the economy's slide towards recession and anaemic domestic demand.

National consumer prices rose 1.9 per cent year-on-year in March, data from the National Statistics Institute showed. That compares with 2 per cent in February, and was the slowest pace in 19 months.

Core inflation, which strips out volatile food and energy prices, was 1.2 per cent year on year, unchanged from a month earlier.

"Core inflation is a good reflection of the weakened Spanish economy. Spain's annual comparative inflation is now almost a full percentage point below Europe which shows an increase in price competitiveness but also the relatively dampened domestic demand," economist at Citi Jose Luis Martinez said.

Weak growth in many euro zone countries is expected to bring inflation down in the 17-country region, although high oil prices are currently adding pressure.

Spanish European Union-harmonised prices rose 1.8 per cent from a year earlier, down from 1.9 per cent in February and also in line with the Reuters forecast.

Even at these relatively low levels, however, prices rises are adding to deep economic woe in Spain.

Spain's economy is already thought to have entered its second recession since 2009 as a four-year economic slump wears on, while massive unemployment and an unfavourable outlook keeps Spaniards away from the shops.

Deficit-fighting measures by the centre-right government, which include tax hikes, could have some inflationary impact this year, Mr Martinez said, though this would mean inflation of around 1.2 - 1.3 per cent in 2013, he said.

Reuters