By Nigel Davies

SPANISH consumer price inflation jumped to 0.9 percent in December and may have further to rise before a weak economy and the impact of growing unemployment drags it back down.

Boosted by year-on-year rises in volatile energy prices, the rise was just above a Reuters forecast of 0.8 percent and up on the 0.4 percent increase in November.

But, while crude oil outweighed the effects of recession in prices, one of Europe's worst performing economies left its mark on jobless queues.
The Ministry for Employment said the number of people registered as jobless hit 3.9 million in December, up 54'657 from the month before. Jobless claims had risen by a similar number in November.

That is well above the 3.4 million jobless in Germany, a country with a population nearly twice the size of Spain.

While its big euro zone contemporaries have emerged from recession, Spain's economy is still contracting and likely shrank 3.6 percent last year, according to the government, and has been shrinking for six straight quarters, “After a decade during which Spanish consumers and companies had their fill of foreign credit, its overdependence on a collapsing property sector have crippled domestic demand while the strong euro has made exporters much less competitive.

While crude prices will also feed inflation for a while, the weak economy could push inflation down again later in the year,” according to Royal Bank of Scotland analyst Silvio Peruzzo. “We look for an even steeper increase in headline inflation in January, that will jump significantly above 1.0 percent,” he said.


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