MADRID, Aug 28 (Reuters) - Spanish inflation slowed more quickly than expected in August, raising expectations of lower inflation in the wider euro zone as energy costs fall.
Spain's EU harmonised inflation fell to 4.9 percent in August from 5.3 percent in July, marking the first decline since April, Spain's National Statistics Institute reported in a preliminary estimate on Thursday.
The result was well below a 5.2 percent median forecast in a Reuters survey of analysts.
The Spanish number preceded wider euro zone data on Friday which is expected to show inflation in the 15-member currency bloc fell to 3.9 percent in August from 4.0 percent in July.
The Spanish preliminary result followed data on Wednesday showing inflation slowed in six German states in August, pointing to downside risks for other European countries.
'It's possible euro zone inflation could be below expectations, its borderline, but 3.8 percent is possible,' said Luigi Speranza at BNP Paribas.
Analysts said the bulk of the Spanish decline was from lower energy prices.
They saw chances of a slight fall in core inflation, which discounts energy and fresh food components, as Spain goes through a severe economic slowdown.
Analysts said Thursday's Spanish inflation reinforced the view that the European Central Bank's next rate move would be downwards.
'You have a clear fall in economic activity, now inflation is falling and data is likely to show credit falling. So this changes the cards for the ECB. Markets will now think about rate cuts, not rate hikes,' said Olivier Gasnier at Societe Generale.
Spain publishes full, final August inflation data on Sept. 11.
(Reporting by Andrew Hay; Editing by Victoria Main) ($1=.6761 Euro) Keywords: SPAIN INFLATION tf.TFN-Europe_newsdesk@thomson.com ak COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
Spain's EU harmonised inflation fell to 4.9 percent in August from 5.3 percent in July, marking the first decline since April, Spain's National Statistics Institute reported in a preliminary estimate on Thursday.
The result was well below a 5.2 percent median forecast in a Reuters survey of analysts.
The Spanish number preceded wider euro zone data on Friday which is expected to show inflation in the 15-member currency bloc fell to 3.9 percent in August from 4.0 percent in July.
The Spanish preliminary result followed data on Wednesday showing inflation slowed in six German states in August, pointing to downside risks for other European countries.
'It's possible euro zone inflation could be below expectations, its borderline, but 3.8 percent is possible,' said Luigi Speranza at BNP Paribas.
Analysts said the bulk of the Spanish decline was from lower energy prices.
They saw chances of a slight fall in core inflation, which discounts energy and fresh food components, as Spain goes through a severe economic slowdown.
Analysts said Thursday's Spanish inflation reinforced the view that the European Central Bank's next rate move would be downwards.
'You have a clear fall in economic activity, now inflation is falling and data is likely to show credit falling. So this changes the cards for the ECB. Markets will now think about rate cuts, not rate hikes,' said Olivier Gasnier at Societe Generale.
Spain publishes full, final August inflation data on Sept. 11.
(Reporting by Andrew Hay; Editing by Victoria Main) ($1=.6761 Euro) Keywords: SPAIN INFLATION tf.TFN-Europe_newsdesk@thomson.com ak COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2008 AFX News
