10 January 2001, 17:04  OUTLOOK: Spain Dec CPI up 0.3-0.4 pct mth-on-mth; up 3.9-4.0 pct yr-on-yr (corr)

MADRID (AFX) - Consumer prices data for December to be released Thursday are expected to show a 0.3-0.4 pct increase from November and to be 3.9-4.0 pct higher than a year earlier, according to economists' forecasts. In November, consumer prices climbed 0.2 pct from October and were up 4.1 pct from a year earlier, at the top end of analysts' expectations.
Both Beta Capital and BSCH Bolsa are looking for a 0.3 pct month-on-month rise in December inflation, leaving the year-on-year increase at 3.9 pct. MMS Standard&Poor's is forecasting a 0.4 pct rise in December from November and a 4.0 pct increase from a year earlier. Beta Capital head economist Felix Gonzalez attributes the more moderate trend registered in the December year-on-year headline inflation to the sharp decline in oil prices over the month.
He is forecasting a 1.2 pct fall in energy product prices in December, compared with the 1.4 pct increase registered in November. MMS Standard & Poor's analyst Stine Madsen agreed that lower oil prices will have a positive impact on last month's headline inflation rate. "Prices fell substantially at the beginning of December, although the trend since then has been rather more stable," she noted. With regard to other key CPI components, Gonzalez said he is looking for a slight uptick in processed food prices in December, while fresh food prices are expected to be softer than in the previous month.
Analysts noted, however, that it is still difficult to judge the potential negative impact on fresh food prices from the recent outbreak of BSE in Spain. On the outlook for the coming months, Gonzalez said that based on an average crude price of 25 usd per barrel "we are forecasting a sharp downturn in the CPI rate during the course of 2001...The average inflation rate for the year should come in around 2.7 pct, compared with our estimate of 3.4 pct for 2000."
Apart from oil prices, he said the other key factor affecting the trend in inflation this year will be salary negotiations. "Workers lost a lot of purchasing power last year, so I think we'll see annual wage increase demands of 3.0-3.5 pct this year...The government will have to push forward with structural reforms to create the right climate to be able to temper such demands," Gonzalez noted.

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