MADRID Nov 13 Spanish consumer prices rose at
their fastest pace since May 2011 in October, increasing living
costs for its already cash-strapped citizens and further
undermining hopes of an economic recovery.
National inflation was 3.5 percent year-on-year, according
to National Statistics Institute data on Tuesday that was in
line with a Reuters forecast and up from 3.4 percent in
"The question right now is if we've hit a ceiling or not.
(The government) didn't expect the (September) VAT rise to have
had the impact it has had and what we're seeing today is almost
all due to the tax rise," said economist at Citi, Jose Luis
The rising cost of living is further weakening already
feeble domestic demand as the country sinks deeper in to its
second recession in three years and unemployment tops 25
Spain's government, which is fighting to cut spending and
reduce one of the euro zone's highest public deficits, raised
value-added tax in September.
It will decide this month if it can afford to honour a
pledge to raise pensions in line with November's inflation
If November's prices rise at a similar pace to October, an
equivalent pension hike would cost the cash-strapped government
an extra estimated 4 billion euros ($5.1 billion) at a time when
it is slashing spending on health and education.
Last month the Bank of Spain warned against raising pensions
given the cost.
Core inflation, which strips out volatile food and energy
prices, was 2.5 percent, compared to a reading of 2.1 percent a
month earlier and the highest reading since November 2008.
Spain's European Union-harmonised prices rose 3.5 percent,
in line with forecasts and with the September figure.
A general strike on Wednesday, the second the government has
faced since it came to power in December, is expected to be one
of the largest since the economic crisis began four years ago as
Spaniards struggle to make ends meet amid the deep spending