Spain has joined the rest of Europe, where year-to-year inflation numbers were down across the board in July. The Consumer Price Index (CPI) fell 0.9% since June and is down four percentage points from a year ago.
While falling prices will definitely help consumers, the CPI shows that the economy is growing slower than expected, because it reflects slack demand. Right now, spending is based less on the intrinsic value of good than the fact that rampant unemployment has people holding fast to cash. Under these circumstances, the government cannot stand idle. It has already lowered some taxes, but it should also push reforms that strengthen the nascent recovery.
