Spanish inflation drops to zero in February

Friday 28 February 2014 09.59
Spain's inflation rate falls to 0%
Spain's inflation rate falls to 0%

Spain's inflation rate dropped to zero in February, an official estimate showed today, as fears of a damaging deflationary spiral haunted sluggish euro zone economies.

Consumer prices were unchanged in February after edging up by just 0.3% in January, according to preliminary data from the National Statistics Institute.

Falling prices for fuel and lubricants kept a lid on inflation, the institute said in a report.

February's inflation rate, if confirmed, was the lowest since October 2013 when consumer prices were also flat.

The inflation rate in Spain, which crawled out of a two-year economic downturn in the second half of 2013, remains well below the European Central Bank's target for the euro zone of about 2%.

While consumers may welcome low inflation, a broad, sustained decline in prices can lead shoppers and businesses to postpone purchases as they wait for prices to tumble even further. 

At the same time, it becomes harder to finance existing debts. The result can push an economy into a downward spiral.

International Monetary Fund head Christine Lagarde warned last month that while growth in the global economy was picking up, there were "rising risks" of the "ogre" of deflation, or falling prices.

European Central Bank chief Mario Draghi has said the euro zone is not in a deflationary period but that protracted low inflation "is a risk by itself" that needs monitoring.