(Adds comment from deputy minister in fourth paragraph, oil price in fifth.)
July 13 (Bloomberg) -- Spanish underlying inflation slowed in June as retailers slashed prices to lure consumers suffering from the highest unemployment rate in Europe.
Core consumer prices, which exclude energy and fresh food, gained 1.7 percent from a year earlier, after a 2.1 percent increase the previous month, the National Statistics Institute in Madrid said today. Headline inflation, based on European Union calculations, was 3 percent, matching an initial estimate on June 30.
Spanish consumers are reining in spending as the economy struggles to emerge from a three-year slump that pushed the unemployment rate to 21 percent. Clothing retailers including Mango started offering discounts of as much as 50 percent in June at the start of the summer sales season. Spanish retail sales posted the 11th annual decline in May.
Inflation will continue to slow in the “coming months” as the impact of the July 2010 increase in value-added tax fades and the surge in oil prices eases, Deputy Finance Minister Jose Manuel Campa told reporters in Madrid today.
The price of crude oil has fallen 9 percent in the past three months and traded at $97.60 at 11 a.m. in London today. Spain’s economy is more sensitive to changes in oil prices than the euro region on average, Bank of Spain Governor Miguel Angel Fernandez Ordonez said on May 23, as he forecast Spanish inflation would slow to below the euro-area average at the start of next year.
--With assistance from Angeline Benoit in Madrid. Editors: James Hertling, Leon Mangasarian
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