CPI Drops to 1.9% – Lowest Level Since August 2010

The Consumer Price Index (CPI) rose by 0.7% in March over the previous month, the same as twelve months ago, while the year-on-year rate fell 0.1% to 1.9%. Following this result, the year-on-year rate posted a half-point drop in the first quarter of this year placing it at half the historic 3.8% high of April 2011.

This easing of inflation was mostly seen in energy products, non-prepared food items and services.

When excluding the most volatile elements of the CPI (non-prepared food items and energy products), so-called underlying inflation remains at 1.2%. This indicator of structural inflation has therefore fallen by 0.3% over the first quarter of the year. The stability in March was caused by the upward trend in non-energy industrial goods being entirely offset by the moderation in services and prepared food items.

The National Statistics Institute also published the harmonised index of consumer prices (HICP) for March, the annual rate of which stands at 1.8% (0.1% below the figure recorded in the previous month). This rate coincides with the preliminary HICP published on 29th March. Comparing this with the estimated annual rate for the Eurozone, the differential in Spain’s favour remains steady at 0.8%.

In month-on-month terms, the CPI increase in March can be basically explained by increasing prices for liquid and solid fuels (2.8%), for non-energy industrial products (1.2%) and services (0.2%).

Compared with one year ago, all the large special groups have levelled out except for non-energy industrial products (up 0.2% year-on-year to 0.3% in March). The most acute moderation took place in non-prepared food items (whose year-on-year rate fell from 1.8% in February to 1.4% in March) and in energy products (where the annual rate fell by 0.4% to 7.5%). Inflation in services fell by 0.1% (to 1.2%) and the same reduction was seen in prepared food items (to 2.7%).

It should be pointed out that the services sector performed particularly well, reducing its rate of inflation so far this year by 0.5% to 1.2% in March, and by 1% since April 2011.

In light of these results, La Moncloa noted that the assessment of the CPI in March remains positive. Inflation fell by 0.1% and remains within the target range set by the European Central Bank. Underlying inflation and the inflation differential in Spain’s favour when compared with its Eurozone partners remain steady, with the positive effects that this has on the competitiveness of the Spanish economy.