SPANISH prices dropped for the eighth straight month in October, official data confirmed yesterday, falling at the slowest rate since April amid base effects from energy prices.

Spain's consumer price index fell 0.7 percent year on year in October in line with a Reuters poll and compared to a 1 percent slide in September and a record 1.4 percent drop in July.

Core inflation - which strips out volatile elements of energy and food - was 0.1 percent in October, the same as September, leading some economists to say risks of a self-perpetuating spiral of falling prices were declining. “There's still a high risk core prices will peep into negative waters for a few months, but I've never backed the theory there will be a deflationary spiral in Spain,” said economist at 4Cast, Jose Garcia Zarate. “Headline prices will turn positive in the next couple of months and there'll need to be a catastrophe for it to turn negative again.”

The Spanish government reiterated it saw no risks of deflation and added it believed core inflation had reached its lowest point at 0.1 percent. “We believe (the core rate) has practically stabilised and we don't expect further falls in the next few months,” the Economy Secretary Jose Manuel Campa said during a conference on the data.

“(Headline) prices are following a trend toward moderately positive levels which the government continues to forecast for the end of the year,” Campa said.

The data preceded euro zone final inflation on November 16 which is expected to show consumer price inflation in the 16-member area on an annual basis was -0.1 percent in October.


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