Spain squeezed by deepening recession and surging inflation

Ben Southwood
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SPAIN slipped yet deeper into depression, data revealed yesterday, while inflation picked up, raising the spectre of so-called stagflation.

Spanish GDP shrunk 0.3 per cent in the third quarter, according to data from official statistics office Ine, the fifth successive quarter without expansion, adding to pressure on Prime Minister Mariano Rajoy to request a full bailout package from Brussels.

This latest fall meant the economy was some 1.6 per cent smaller than a year ago and around five per cent smaller than the pre-recession peak in the third quarter of 2008.

Jennifer McKeown at Capital Economics said this new low might not be the worst of Spain’s deep recession.

“The third quarter's GDP figures were probably flattered by consumers bringing forward spending ahead of September's VAT hike and we still think that renewed falls in sentiment and a deeper economic downturn are to come,” McKeown said.

The economic contraction came in tandem with an uptick in inflation, which saw yearly growth in the consumer price index hit 3.5 per cent in October, up from 3.4 per cent in September and 1.9 per cent as recently as June.