The deflation in Spain falls mainly on the plain

According to recent data released by the Instituto Nacional de Estadistics, consumer prices in Spain last month fell for the first time in almost 50 years. Reflecting change in year-to-year prices for the month of March, Spain became the first country using the Euro to record a negative inflation rate of -.1 percent Coupled with this predicament, the nation’s jobless rate is expected to reach close to 20 percent for all potential workers which would present an alarming and significant cause for concern for this large and developed nation. In response to a concoction of rising unemployment and declining consumer prices, economists fear Spain may be entering the beginning stages of a deflationary period. The danger present within this type of economic condition is that it runs the risk of perpetuating an indefinite cycle of diminishing economic output and growth. For example, in response to rising unemployment consumers hold back on spending, which causes companies to cut prices. If, however, consumer prices do not return close to their previous levels in a timely manner, further declines in revenue will be responsible for more cuts in jobs and wages which would serve as an impetus for the cycle to begin again. While Spain has had historically higher unemployment rates when compared to other European countries, the recent and striking rise in those looking for jobs has unnerved many people. The jobless rate for those under 25 is at a Depression-like level of 31.8 percent, the highest among nations within the European Union. It is also important to note that the risk of deflation is not an exclusive Spanish concern. Ireland, Portugal and Luxembourg have reported drops in prices as well. When compared to other non-European economies, countries like Spain and, for that matter, all others using the Euro are more systematically vulnerable to deflation.