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Weaker Spanish and German inflation spark further deflation talk

Weaker Spanish and German inflation spark further deflation talk
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Inflation in Spain was down in March. Consumer prices fell 0.2 percent from a year earlier – sliding at their fastest annual pace in almost four-and-a-half years

Much of that was from a drop in food and drink costs, but the figures also reflected the fact that March last year included the busy Easter period.

The numbers further fuel concern about deflation in the eurozone, as did the latest statistics from Germany, where a key measure of inflation unexpectedly dropped this month.

The harmonised index of consumer prices showed inflation slowed to 0.9 percent from the same period last year. The expectation had been for 1.0 percent.

Falling energy costs were a big factor and economists said the data did not signal deflationary tendencies in the German economy.

Still this does raise pressure on the European Central Bank to stop any drift toward deflation in the eurozone.

The ECB has said it sees only a limited risk of deflation, but is paying close attention to the value of the euro and its impact on prices.

If the euro strengthens further against the dollar, it would make imported goods cheaper and thereby put further downward pressure on inflation.