The Spanish economy expanded by solely 0.3% in the first quarter of 2008. In 2007, the same number was 0.9%, i.e. three times higher. At the same time, inflation was above 4% (4.5% in March and 4.2% in April). These numbers fit well with my concern that stagflation might start in the worst-hit housing crisis countries (US, Spain, Ireland, Baltics…) and then spread to the rest of Europe and Asia.
[Admittedly, if we extrapolate from the (mere) two inflation observations the inflation trend is pointing downwards. I believe this to be purely temporarily, though, and it will be interesting to see the figures for the second quarter.]
