Spain: Inflation Remains Stubbornly High, Slowing Only Slightly to 3.9% in March; Current Account Deficit Surges 55% in 2005 to 7.6% of Gdp

Summary

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The preliminary estimate of March inflation was 3.9%, only a little lower than February's 4.1%, although core inflation has been under 3% and is expected to remain stable. The current account deficit ballooned 55% in 2005 to EUR69bn, or 7.6% of GDP. This has not only resulted from a higher import bill and a savings investment imbalance, but also from a decline in net tourism revenues, down 3.5% to EUR25.7bn. Meanwhile, the PMI for manufacturing in March reflected upbeat prospects across the sector, rising to 54.74 from 52.75 in February, the sharpest monthly improvement in business conditions since June 2000. Employment in manufacturing grew in March while the total (economy-wide) number of jobless fell almost 21,000 in March, bringing the jobless total down to 2.15m. There was a reduction in unemployment across the board, although services recorded the largest declines. Consumer sentiment edged up in March, and overall we expect healthy domestic demand to result in 3.3% year-on-year growth in Q1.

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Spain: Inflation Remains Stubbornly High, Slowing Only Slightly to 3.9% in March; Current Account Deficit Surges 55% in 2005 to 7.6% of Gdp

March inflation provisionally estimated at 3.9%

According to initial estimates by the National Statistics Institute (INE), inflation in March slowed to 3.9% from 4.1% in February and 4.2% in January, the latter being the highest reading since June 2001. The breakdown of the CPI data is yet to be published, but finance minister Pedro Solbes po...

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