According to Spanish secretary of state for economic affairs, David Vegara, annual inflation has risen dramatically. Mr Vegara claims the annual rate of inflation for July, at 5.3%, is the highest rate seen for almost 16 years. However, he added that it should fall to below 4% before the end of the year.

The country’s economy has been facing turmoil in recent months, with its building sector taking a series of hits. Forecasts suggest that economic growth will be just 1.6% in 2008 compared with 3.8% last year, falling even further to just 1% in 2009.

Meanwhile, figures released by its statistics office show that the consumer price index dropped by 0.5% in July, largely driven by a worrying 11.3% drop in shoe and apparel prices.

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