Withdrawing aid has a price in inflationary terms. It was known and the forecast has been fulfilled, with an effect even greater than expected. In this way, prices rose to 3.4% year-on-year in January, according to the advanced IPC data published this Tuesday by the National Institute of Statistics (INE). This is three tenths more than in December, which breaks a streak of two consecutive declines.
The figure comes with the end of some of the energy aid adopted by the inflation crisis with the war in Ukraine. Since the beginning of the year, light has come to bear a VAT of 5% to 10%, in addition to the return or increase of other taxes in the sector. Gas also bears a 10% VAT, up from the previous 5%. “This evolution is mainly due to the rise in electricity prices, compared to the drop in January 2023”, confirms the INE in a note. Yes, the reduction in VAT on basic items is maintained until June.
“The data is not surprising due to the partial withdrawal of aid, which explains the increase”, says Alfonso Fernández, professor at EAE Business School. In any case, it is far from the 10.8% of July 2022, in the midst of the energy crisis after the conflict began in Europe, which turned the energy market upside down. The INE states that fuel prices decrease in January, while a year ago they were rising.
If you compare January with December, prices rise by a tenth, while in December they were frozen and in November they fell by 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 or non-processed product prices, which dropped by another two tenths and remains at 3.6%, its lowest since in April 2022. Since the peak of 7.6% in February last year, the decline has been gradual, despite a few surprises along the way. It is considered a reliable indicator of the underlying trend in prices, so it is very good news that its rate of moderation continues.
“The underlying 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. A reference with three risks: the Red Sea crisis, the withdrawal of fiscal measures and the rise in labor costs.
For his part, the Minister of the Economy, Carlos Cuerpo, has highlighted that inflation “remains contained at around 3%”, while the underlying inflation “continues to moderate”. “The moderation of inflation continues, which is being compatible with the maintenance of support measures for households and companies most affected by price increases”, he pointed out. The INE will have to confirm the data and give more details of the evolution by category, such as among foods, which focus much of the attention of consumers, on February 15.
