Spain’s Underlying Inflation Rate Stagnates as Slump Persists

Spain’s core inflation stagnated in August, as the second recession in three years pushed the jobless rate to almost 25 percent and depressed consumer demand.

The Underlying inflation rate, which excludes energy and fresh food, was unchanged from July at 1.4 percent, the National Statistics Institute in Madrid said today. Prices rose 0.2 percent from the prior month. The August annual rate matched the median of six estimates in a Bloomberg survey.

Spanish retailers slashed prices during the seasonal discount period as indebted households suffering from the highest unemployment rate in Europe reined in spending. Inflation may accelerate this month as a value-added tax increase comes into effect, even though companies including Inditex SA (ITX), the owner of fashion brand Zara, have said they will absorb the higher levies rather than passing them on to consumers.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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