Prices have fallen by over 1% year over year in Spain: 1.1% to be precise, lower than 0.7% expected. The country was already experiencing deflation, with -0.5%, and the impact of the oil prices makes it look worse in the initial report for December.
With euro-zone inflation standing at 0.3% in November, it could certainly fall below 0%. If in Spain, oil prices knocked off 0.6% from annual CPI and this happens for the whole euro-zone, we have -0.3%.
Spain was expected to report an annual drop of 0.7% in consumer prices for December in the initial read. In November, CPI printed -0.4%. Spain is experiencing outright deflation, even though the economy is growing nicely.
EUR/USD traded just under 1.2150 before the publication, still suffering the news about elections in Greece that are due in about a month.
Spain is the euro-zone’s fourth largest economy, but the importance of this release does not come from the size but rather from the timing and oil: due to the holidays, Spain releases its inflation data earlier than others. In addition, the falling price of oil could be reflected in this report, giving an indication of how low euro-zone inflation could fall to and how fast the ECB could act on QE: will they move on January 22nd?
Later we have some ECB data and then some figures from the US just before the year draws to an end.