The Spectre of Deflation™

The breakdown of last Thursday's November Spanish CPI produces results not entirely encouraging to the various vigilantes keeping us abreast of the approach of the Spectre of Deflation™. Simply put, beyond the continued decline in mobile phone tariffs (now seven years old) it looks like the grand part of that negative 0.4 percent annual print is attributable to the price of petroleum.

Not only does the price of crude oil have an obvious effect on housing and transportation costs but it is probably also producing the rather odd negative print for 'culture and entertainment'. A look at the INE's press report reveals that the package tours component of that group is responsible. Package tours - transportation included.

Occupants of the watchtower will have to satisfy themselves with sightings of low endogenous inflation, and maybe consider the possibility that lower fuel prices will provide a boost  to domestic consumption in coming months. In the context of recent improvements in domestic spending, the timing really couldn't be better.



Charles Butler