Wednesday, March 2, 2011

Spain's inflation hits two-year high

Source: Press TV

Spain's annual inflation rate has hit a two-year high of 3.4 percent in February, painting a grim outlook for the country's frail economy.

The country's National Statistics Institute says higher food and fuel prices have pushed the inflation to its highest level since October 2008 when fuel prices were soaring. Inflation was at 3.0 percent in January this year,a PressTV correspondent reported.

"This is not good for households and is going to eat in to their income. Given wage growth is pretty subdued at the moment, it's another reason to think households and the Spanish economy will have another tricky year ahead," Capital Economics economist Ben May said.

During the second half of 2008, Spain's economy slumped into recession as the global financial meltdown compounded the collapse of the once-booming property market.

In 2010, the economy shrank by 0.1 percent and the unemployment rate reached 20.33 percent, the highest level in the Organization for Economic Cooperation and Development (OECD), according to Channel NewsAsia.

As for 2011, the government forecasts an economic growth of 1.3 percent, showing greater optimism than the International Monetary Fund, which has predicted a growth of just 0.6 percent.

Spanish Prime Minister Jose Luis Rodriguez Zapatero predicated earlier this year that declining oil prices would ease inflation. However the recent political turmoil sweeping the Middle East and North Africa has raised crude prices, adding to fears that the inflation may be driven even higher.

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