Spanish Core Inflation Up Even as Recession Deepens

Spain’s core inflation rate accelerated in January as the deepest austerity measures in the nation’s democratic history sustained price increases while pushing the economy deeper into recession.

Core inflation, which excludes energy and fresh food prices, accelerated to 2.2 percent in January, the National Statistics Institute in Madrid said today. That’s more than the 2.1 percent median of four forecasts in a Bloomberg survey. Underlying prices fell 1.6 percent from the previous month.

Spain, the euro area’s fourth largest economy, is headed for a second straight year of recession as Prime Minister Mariano Rajoy’s tax increases and spending cuts undermine domestic demand. The European Central Bank last week left its benchmark interest rate unchanged amid a weak economic outlook for the region.

Carlos Ghosn, chief executive officer of France’s second-largest carmaker Renault SA, yesterday predicted that Spanish and Italian car deliveries will drop to a 30-year low in 2013. Retail sales in Spain, which have slumped for 2 1/2 years, dropped 10.7 percent in December from a year earlier.

Spain’s headline inflation rate, based on European Union calculations, was 2.8 percent, matching an estimate published on Jan. 31. Stripping out taxes, inflation was 0.7 percent in January, according to the Spanish statistics institute, and 0.2 percent if fresh food and energy were also excluded, according to the Spanish measure.