Spanish inflation slowed to three per cent in October as the economy ran out of steam, official data showed today, but economists saw bad news in an unexpected rise in core inflation.
The consumer price index came in below the average of analysts' expectations for a 3.1 per cent year-on-year rise, helped by a dramatic fall in energy prices as world demand slowed. Inflation stood at 3.4 per cent in September.
The Spanish economy is expected to grow about three percent this year, down from its four per cent rate of the last four years, but still above the euro zone average.
On the heels of the inflation figures the Bank of Spain warned that the government would not hit its forecast 2.9 per cent growth in gross domestic product in 2002.
"With the information available to date it seems unavoidable that there will be an additional reduction in the growth rate which will tend to move in the range of two to 2.5 per cent, with a risk on the downside," Bank of Spain Governor Jaime Caruana told the Senate.
The improvement in the headline inflation rate was offset by a rise in core inflation, which excludes energy and fresh food prices. That rate rose to 3.7 per cent year-on-year in October from 3.5 per cent in September - much worse-than-expected due to a leap in processed food and tobacco prices.