Inflation was lower than expected

SPANISH inflation was lower than expected in February as the weak economy pushed down food prices and oil price pressure eased, preliminary data showed yesterday.

The EU-harmonised consumer price index rose 0.9 percent year on year, the National Statistics Institute said.
That was below a 1.1 percent rise in January and the 1.1 percent forecast by analysts polled by Reuters.
The slip in Spanish inflation provided a bearish clue to flash CPI data for the eurozone as a whole for February, which is expected to remain unchanged from the previous month at 1.0 percent. “This inflation data shows economic weakness. I think we're going to have bad news about economic growth in the first few months of the year and I expect inflation to continue to moderate,” said Jose Luis Martinez of Citigroup. While providing no details, the National Statistics Institute said inflation had eased due to falling food prices and the base effect from rising oil prices in February 2009.

The European Commission and the International Monetary Fund think Spain's economy, the fourth-largest in the eurozone, will contract by 0.6 percent in 2010.

Spain, where GDP contracted by 3.6 percent in 2009, will be the only large European Union country to remain in recession as it suffers from high levels of private sector debt, the collapse of a property boom and relative lack of competitiveness.