MADRID: 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.
"It now looks likely that people are doing the kind of spending they had shelved for a long time," he said.
The December rise followed a 1.9 percent increase in retail sales in November. Retail sales have grown eight out of the past nine months after a three-year period of declines, and fourth quarter data so far shows one-off purchases picking up.
Big retailers, such as Carrefour, have hired more permanent workers in Spain, while consumer confidence is recovering.
The French retailer is creating 3,000 permanent jobs for young Spaniards, aimed at strengthening its customer services force.
UNCERTAIN OUTLOOK
While retail sales were up 1.0 percent in 2014, the first full-year rise since 2007, experts remain cautious about the longer trend, which remains uncertain.
Household spending in 2013 was still more than 10 percent below the level of 2006, according to INE data. That means the overall outlook for retail is selective and tough.
"Despite the good reading, the pace of growth for retail is still below the pace of growth for both the economy and consumer spending," said retail association ANGED in a statement.
A combination of an ageing population, young people putting off starting families, job instability, wage cuts and a large number of unemployed are likely to limit the rebound.
Unemployment data last week showed 433,900 jobs were created in 2014, although overall unemployment nudged up to 23.7 percent in the fourth quarter. About 40 percent of the jobs created in 2014 were temporary.
Thursday's INE data showed employment rates in retail grew just 0.1 percent in 2014 as a whole.
The government says that, so far, falling prices are not having pernicious economic effects and lower prices are encouraging Spaniards to spend a little more freely.
"The fall in the oil price is a very positive factor for an economy such as Spain's ... because it results in more purchasing power for families," Economy Minister Luis de Guindos told radio station Capital.
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