Entradas Etiquetadas con ‘Inflation’

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    [ID] => 6959
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    [post_date] => 2010-05-14 13:45:05
    [post_date_gmt] => 2010-05-14 11:45:05
    [post_content] => Underlying inflation in Spain declined in this month´s CPI report, for the first time since the series started in 1986.  The result highlights the rigidities in Spain´s product markets and could actually be a good sign for future growth prospects, contradictory as it may seem.

The headline CPI rose sharply in April, due in large part to clothing and housing prices.  This could be seen as a sign of returning health for the Spanish economy, though it also points up the same rigidities that have made the crisis so serious.   Housing prices under any economic analysis should decline in a country where oversupply is more than evident and thousands of units stand empty.

The declining underlying figure, however, shows up the demand weaknesses in the segments of the economy that are less regulated and therefore more responsive to market conditions.  Communication, leisure and the tourist-related industries –hotels and restaurants—showed price declines year/year, as did products such as medicines and therapeutical equipment that may be cheaper due to the recent dollar weakness or more competitive markets abroad.

Is this underlying deflation a good or a bad sign?  On the one hand, deflation is a sign of a “sick” economy.  That comes as no surprise:  with joblessness at 20+%, Spain´s recovery cannot be rapid.
But on the positive side, without a currency to devalue, Spain stands little chance to recover competitiveness if it does not enter a deflationary period of some sort.  Although economists fear deflation, Spain and other low-productivity/high-inflation countries in the euro area are treading new ground going forward, as they seek ways to regain competitiveness and stimulate exports to help them grow out of the crisis.  The territory is unknown and not without risks, but deflation concentrated in key export sectors could be Spain´s only chance for an external growth impulse in the wake of the Great Recession.
    [post_title] => Underlying deflation in Spain:  bad news or good news?
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    [post_modified] => 2023-12-13 13:43:01
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Underlying inflation in Spain declined in this month´s CPI report, for the first time since the series started in 1986. The result highlights the rigidities in Spain´s product markets and could actually be a good sign for future growth prospects, contradictory as it may seem. Seguir leyendo…