Spain’s PPI Drop Is Damped

Spain’s headline industrial PPI price index for all industries fell by 1.1% in November after falling by 0.8% in October. The PPI is showing ongoing deceleration similar to the performance of the PPIs from most developed economies.

Spain's headline PPI falls by 7.3% year-over-year, rises at a 1.2% annual rate over six months, and then falls at a 3.7% pace over three months. Consumer goods prices rise by 7.3% over 12 months, slow to a 6.1% pace over six months, and then accelerate gaining at a 14.6%, annual rate over three months. Intermediate goods prices fall by 5.4% year-over-year, fall at a 1.3% annual rate over six months, and then rise at a 2.1% annual rate over three months. Investment goods prices rise by 2.5% over 12 months, rise at a 1.4% annual rate over six months, and then accelerate to a 3.1% annual rate over three months. All the annualized three-month changes are stronger than their counterpart 12-month changes.

The headline change for total industry in Spain shows more weakness than in the components for manufacturing categories alone in the table detail. Consumer goods prices in the manufacturing sector are up strongly over three months compared to both their six-month and year-over-year gains. Intermediate goods demonstrate steady acceleration as their tendency to fall over 12 months and six months gives way to a rise over three months. Investment goods prices show steady expansion but no acceleration although the 3-month gain is the strongest gain over the usual sequence comparing 12-months, to 6-months, to 3-months.

On balance, Spain is experiencing sequential price pressures despite posting two months of declines and the headline industrial price index. The manufacturing sector seems to have more pressure than the more comprehensive industrial sector experiences.

And while the sequence of gains over 12 months, six months, and three months, seems quite tame for the overall industrial PPI in Spain, if we look at the trends for each of those horizons separately, the conclusion changes. Spain has a flattening trend for its industrial PPI with the declines in prices year-over-year having slowed down, begun to flatten out, and show lesser as well as diminishing declines. Over six months, the percent change profile shows clear acceleration after falling at close to a 20% pace for some periods; the six-month percent change now shows persistent small increases. The three-month percent change in May was falling at a rate in excess of a 20% pace; in recent months, the three-month percent change has been increasing although this month it dipped back into negative territory, showing a net decline over three months. Yet, it had risen over three months over each of the preceding three-month periods ended in August, September and October. The underlying trends for Spain’s producer prices are not as beneficial as the headline may suggest and this observation gives some weight to the notion that the rate of change of producer prices may be slowing or coming to an end.