Spanish unemployment has fallen for the first time since 2007 but remains stubbornly high while inflation is at a near two-year peak, data showed, reinforcing concerns the country may tip back into recession.
Unemployment fell to 19.8 per cent in July-September from 20.1 per cent the previous quarter as layoff rates slowed and a successful holiday season helped boost jobs in the key tourist industry, the National Statistics Institute said today.
Only the volatile services sector reported an increase in employment, however, and separate data showed consumer prices rose this month at their highest rate since November 2008.
Spain's annual European Union-harmonised inflation reached 2.2 per cent, above the European Central Bank's target range and making uncomfortable reading for the bank as it considers whether to extend monetary stimulus measures designed to bolster, among others, Spain's financial sector.
Newly appointed labour minister Valeriano Gomez has said he does not expect the economy to start creating net jobs until mid-2011.
Some economists, however, say Spain cannot create jobs until it has sustained economic expansion of around 2 per cent, which even optimistic forecasts do not expect until 2012.
The higher inflation number risks saddling Spain with price pressures that record low interest rates of 1 per cent which Madrid has no control over -- and which analysts do not expect the ECB to raise until the fourth quarter of next year -- will do little to stem.
The flash inflation data did not provide a full breakdown of prices in Spain, to be published November 12th, but while headline prices were seen affected by electricity and food costs, underlying inflation was expected to remain subdued.
Meanwhile, Spain's current account deficit fell to €2.889 billion in August from €3.344 billion a year earlier, mainly due to a fall in the trade deficit and increase in a surplus of services balance, the Bank of Spain said today.
Reuters