Spanish Inflation Slows Down Unexpectedly Due to Fuel and Tourism Costs

According to Yahoo News, Spanish inflation experienced an unexpected slowdown, marking the first decline since June, primarily due to decreases in fuel and tourism costs. Consumer prices increased by 3.2% year-on-year in November, compared to 3.5% in the previous month, defying economists' median estimate of a 3.7% acceleration in a Bloomberg survey. An underlying pressure gauge, excluding energy and fresh food, fell to 4.5%, a more significant decrease than anticipated. These figures, the first for November from a major euro-zone economy, provide insight into inflation trends as European Central Bank (ECB) interest rates remain on hold after a series of unprecedented hikes. Germany, Europe's largest economy, is expected to release data later in the day, revealing a slowdown to 2.5%. Analysts predict that price increases in the 20-nation euro area as a whole moderated to 2.7%, approaching the ECB's 2% target, with a report due on Thursday. Spain experienced inflation dropping below the ECB's target in the first half of 2023, although it later rebounded, primarily due to base effects that will continue as the government phases out support to alleviate the country's cost-of-living crisis. Some measures will remain in place, such as the government's announcement to maintain a value-added tax break on food until June and continue offering free transportation for specific groups, including young people. While ECB officials like Vice President Luis de Guindos have stated that Europe's economy is losing momentum and faces recession risks, they have also indicated that price gains may increase again in the short term. This situation is likely to maintain interest rates at their current levels for some time, with policymakers also hesitant to discuss when the first cuts may begin.