Energy Costs Push Spain’s Inflation to 29-Year-High

Inflation sped up from 4.0% in September and is running at its fastest pace since September 1992, when the rate was 5.8% as the peseta was steeply weakening against the deutschmark.

The inflation surge has been fuelled by energy costs and to a lesser extent by the prices of tourism packages and vehicle fuels and lubricants, according to INE.

INE data also showed Spain’s EU-harmonised consumer price index rose by 5.5% in October on an annual basis, the higher reading recorded since INE started collecting the data in 1997. Analysts polled by Reuters had expected a 4.8% price increase.

Inflation has risen all across the euro zone in the past couple of months, but to a lesser extent. Most countries are due to release data on Friday. The region’s EU-harmonised annual rate was 3.4% in September.

Bank of Spain expects relatively high inflation rates to prevail in the country over coming months although their underlying causes are mainly transitory, its Governor Pablo Hernandez de Cos said on Monday.

A surge in energy prices could last through the winter as demand generally increases because of cold weather while oil and gas storage levels are relatively low, he said.

Spiralling energy costs have also pushed Spanish industrial prices to their highest level since December 1977 after jumping 23.6% year-on-year in September, according to INE data published on Tuesday.

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(Reporting by Mariana Ferreira Azevedo and Aida Pelaez-Fernandez, editing by Inti Landauro and Toby Chopra)