Spanish Inflation Slows More Than Expected as Spending Plunges

Spanish inflation slowed more than expected April amid a deepening recession in the euro region’s fourth-largest economy that saw retail spending plunge.

Consumer prices, based on European Union calculations, rose 1.5 percent from a year earlier, compared with 2.6 percent in March, the National Statistics Institute in Madrid said today. That’s less than the 2.2 percent increase economists predicted, according to the median of 11 estimates in a Bloomberg News Survey. Spain’s national inflation measure showed a 1.4 percent gain.

Economy Minister Luis de Guindos last week said inflation may fall below 1 percent in the second half. He also said gross domestic product will shrink 1.3 percent this year instead of the 0.5 percent initially forecast as the government is implementing the toughest austerity measures in the nation’s democratic history.

The government has requested two more years to tackle the widest budget deficit in the EU after the economy contracted for a seventh straight quarter in the first three months of 2013. Paris-based Danone’s Co-Chief Operating Officer Bernard Hours last week said the owner of Evian water and Activia yogurt brands will operate “defensively” in Europe this year as the economic environment could worsen in France and Spain.

Retail sales, adjusted for the number of working days, 8.9 percent in March from a year ago after a 7.6 percent drop in February, INE said in a separate release today. Retail sales have declined every month since June 2010 as tax increases including two valued-added tax hikes have undermined households’ spending.

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