The partial withdrawal of energy aid should have had an impact on prices and this has been demonstrated. It is one of the causes that explains the rise of three tenths of inflation in January, reaching 3.4%, according to data published by the National Institute of Statistics this morning. In this way, there is the first rise in the CPI since September, which reaches its highest level since October. It is not good news, but it was predictable, and confirms the data advanced two weeks ago.
Let us remember that, 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 in this area. A VAT of 10% is also applied to gas, compared to the 5% it had previously.
Precisely, one of the elements of this increase of three tenths has to do with the increase in electricity prices compared to the decrease that occurred in January of last year. On the other hand, as far as fuel is concerned, they are falling, while in the same month last year they were rising.
“The rebound is greatly influenced by the partial withdrawal of tax cuts, which has raised the inflation of electricity and gas, and also by the rise in food prices. Virtually all of them have risen,” says María Jesús Fernández, from Funcas.
There is one negative point, which is how month-on-month inflation, compared to December, has increased by one tenth, and that in January, when the first month of the year, prices tend to be reduced compared to December due to the impact of sales.
As far as food is concerned, it remains at very high levels. 7.4%, which is one tenth more in year-on-year terms than in December, although certainly far from the prices reached previously. It represents a brake on the correction that has been occurring in food prices in recent months, after reaching very high levels above 16% in February of last year. However, it is noteworthy that it rises one tenth when in this area the discounts on food VAT are still maintained until June, and despite this, they remain high. The moderation of prices will not be noticeable when going to the supermarket.
Once again, olive oil continues to be the food whose price rose the most, 62.9%, which represents a considerable increase compared to the 54% that this same product increased in December. If examined with more perspective, in three years, from January 2021 to the present, it has risen 176.5%. Oil is followed by increases in fruit juices, with a 21% increase, legumes and vegetables, with 15.6%, and fruits, with 13.7%.
“It is a contained rise in food prices due to the elimination of aid,” says Manuel Hidalgo, professor at the Pablo de Olavide University, who considers that the three-tenth increase in general inflation is determined by electricity, while that foods have not allowed moderation.
The good news from today’s data comes from underlying inflation, which does not take into account fresh food or energy, and is considered a more reliable indicator of underlying price trends. In this case, it continues to moderate, and decreases two tenths, to 3.6%. It is a gradual moderation and practically without pause since the beginning of 2023 when it was at 7.6%. And it also represents its lowest level since March 2022. With these data, the two types of inflation, general and underlying, are now only separated by two tenths.
