Spanish retail sales leapt 6.5 percent year-on-year in December, the biggest increase since 2003, as Spaniards spent at Christmas, encouraged by an improving economic outlook and falling oil prices. It was the latest sign that falling prices are boosting consumer spending and growth, rather than translating into "bad" deflation, where consumers delay purchases in the hope that prices will be lower in the future.
Thursday's data on a calendar-adjusted basis from the National Statistics Institute (INE) showed the greatest rise was in consumer durables, up 8.2 percent as shoppers bought pricier household goods they had previously held back on. Food sales increased 4.9 percent year-on-year and personal equipment, including clothing, was up 5.0 percent. Even excluding sales at service stations, up 6.0 percent, overall sales were up 4.7 percent.
Spain's economy, which mostly depends on domestic demand to grow, is expected to expand by at least two percent this year after a six-year crisis during which high unemployment and high levels of private debt have curbed spending. Tax cuts, lower oil prices and job creation are feeding hopes of healthier high street spending. Expectations of job creation encourage people to spend, even people who are already working, Jose Maria Bonmati, director general of retail association AECOC, told Reuters.