Spanish deflation cools, German prices rise more than expected

Consumer prices in Spain continued to decrease in September; however, the pace of downward movement improved from previous month. Spanish deflation reached 0.3% this month on a yearly basis, compared to a 0.5% drop in prices in August. At the same time, taking into account Spanish methodology of calculating the indicator, prices went down only 0.2% in September. It raises hopes that Spanish CPI numbers may improve overall situation in the single currency area, where inflation is likely to remain in the 0.3%-0.4% range after data release on Tuesday. Spain experienced one of the hardest economic challenges in the currency bloc, including GDP plunge and strong surge in unemployment. However, nowadays the country's economy is one of the fastest-growing in the Euro area, as it added annual 1.2% in the second quarter of this year.

Moreover, inflation data for Germany was released better than predicted. While the European Central Bank is going to add extra stimulus to the economy to increase inflation as a major goal, German prices rose 0.8% in September on the annual basis, better than a 0.7% estimate from economists. Month-on-month, however, the CPI was unchanged despite outlook of a 0.1% decline. As Germany accounts for the biggest of Eurozone's economic activity, its data may considerably influence overall situation in the region.