Prices rose to 3.4% year-on-year in January, coinciding with the withdrawal of part of the Government’s aid package, according to advance CPI data published this Tuesday by the National Institute of Statistics (INE). They are three tenths more than in December, to end a streak of two consecutive declines.
The figure comes with the end of some of the energy aid launched due to the inflation crisis with the war in Ukraine, so it is not surprising.
Since the beginning of the year, electricity has started to bear a VAT of 5% to 10%, in addition to the return or increase of other taxes on the sector. Gas also bears a VAT of 10% from the previous 5%. “This evolution is mainly due to the increase in electricity prices, compared to the decrease in January 2023,” confirms the INE in a note. Yes, the VAT reduction on basic elements is maintained until June.
“The data is not surprising due to the partial withdrawal of aid, which explains the increase,” emphasizes Alfonso Fernández, professor at EAE Business School. In any case, the 10.8% of July 2022 is far away, in the midst of the energy crisis after the conflict began in Europe, which turned the energy market upside down. The INE affirms that fuel prices decrease in January, while a year ago they increased.
If January is compared to December, prices rise by one tenth, while in December they were frozen and in November they fell 0.3% in the same comparison.
The one that does show a clear downward trend is underlying inflation, which does not take into account energy prices or unprocessed products, which drops another two tenths to 3.6%, its lowest since April 2022. From the peak From 7.6% in February of last year, the fall has been gradual, despite some surprises in the middle.
“The underlying inflation is moderating, it is a positive path, but we cannot relax. General inflation is more volatile and geopolitical uncertainties have a great influence and are not controllable,” warns Fernández. “There are three aspects that can have a negative impact, even with more increases: the Red Sea crisis, the withdrawal of fiscal measures and the rise in labor costs,” he reviews.
The Minister of Economy, Carlos Body, highlighted in a video that inflation “remains contained at around 3%”, while the underlying inflation “continues to moderate”. “The moderation of inflation continues, which is compatible with the maintenance of support measures for households and companies most affected by price increases,” he noted.
The INE will have to confirm the data and give more details of the evolution by categories, such as foods, on February 15. “Looking to 2024, the prospects for the Spanish economy are clouded by the delicate balance between growth and price stability. Predictions of lower inflation may not be as solid as would be desired,” said Javier Molina, senior analyst at markets for eToro.