What was predicted has been fulfilled. The increase in the VAT on electricity has a price and has resulted in this rise in inflation in March. That’s four tenths more, which puts it at 3.2% year-on-year, confirming the rate already indicated by the data anticipated by the INE two weeks ago. On the other hand, the moderation in the price of food stands out, one point less than the previous month, to 4.3%, which represents the lowest rate in more than two years, since the end of 2021. D In this way, a gradual process of returning to normality in food prices is certified, despite the fact that 4.3% is still really a high rate.
Electricity and fuels are what have caused this upswing. Electricity, due to the increase in VAT on electricity, which has returned to the usual levels of 21% after being lowered for a long time, first to 5% and then to 10%. The effects of the increase are largely responsible for this rise of four tenths in March. Specifically, three of the four tenths of the rise in inflation for the month are attributed to this normalization of VAT.
This increase in VAT on electricity has been caused by the drop in the wholesale price of electricity. Dropping below the €45 MWh limit automatically triggered the return to 21% VAT, something that happened in both February and March.
Meanwhile, food has played in the opposite direction. It is true that they have risen, but less than in the same month last year, so the year-on-year rate has decreased. It remains at the levels of two years ago. You have to go back to November 2021 to find a lower rate; then it was 3.3%.
This moderation is largely due to the drop in prices of legumes and vegetables and other products that increased in March last year. It is also influenced by the price of meat, which rises, but less than in the same month of 2023. On the other hand, olive oil is still intractable, with a year-on-year rise of 70%, above even the February increase
Another data that supports this process of food price moderation is the intermonthly rate. It has only increased by a tenth between February and March of this year, which confirms the gradual deceleration.
Food began in November 2021 an escalation that meant living with skyrocketing prices for two more years, which reached the ceiling at the beginning of 2023 and which since then began this progressive deceleration, which does not prevent the bill from still be expensive every time we go to the supermarket. In February it was 5.3%, and now, one point less, 4.3%.
On the other hand, underlying inflation, which does not include energy or fresh food, is still moderating and has fallen by two tenths in March, to 3.3%; that is to say, practically at the same level as the index in general. It is the lowest level in the last two years.
The two rates, general and underlying inflation, almost coincide after a long time with diverse trajectories. The much more volatile broad began the climb earlier and also the subsequent moderation, while the underlying, more reliable as an indicator of underlying trends, began the rise later, but has also taken much longer to reduce – if It is an extremely slow process.
“Food tends to moderate, even a little more than we planned. On the other hand, what still worries us are the services, which are still increasing”, affirms María Jesús Fernández, from Funcas, pointing out how they have risen by 3.9% this month at an annual rate.
For his part, Oriol Aspachs, from CaixaBank Research, positively assesses the behavior of the underlying inflation, with the current 3.3%, which is less than half of the 7% that reached last year. “Tendencies of inflationary funds are clearly moderating”, says Aspachs.
In the coming months, the forecast is that general inflation will continue to experience ups and downs, with increases in the coming months and decreases thereafter. For Funcas, the average annual rate will be 3.2%, both for the general and the underlying. A slight upward revision due to inflation in services and the rise in the price of oil.
