Inflation Falls by 0.3% in July to Stand at 1.8%
August 16th, 2013
The Consumer Price Index (CPI) recorded a month-on-month decrease of 0.5% in July, compared with a 0.2% decline twelve months ago. According to the data published on Tuesday by the National Statistics Institute, the year-on-year rate has fallen by 0.3% to now stand at 1.8%.
This fall in the year-on-year rate of inflation can be mainly explained by the falling cost of non-energy industrial goods, the prices of which recorded a much sharper decline in July this year than in the same month of last year. The cost of energy products also had an influence, albeit to a lesser degree, as the cost of these products in July 2013 rose noticeably less than in the same month of last year.
The month-on-month decline in the general index can be explained by non-energy industrial goods (down by 4.1%) and in particular clothing and footwear, which fell by 12.6% due to the effect of the summer sales. The cost of communication contributed to this decline to a lesser extent with a drop of 1.2%. In contrast, it is worth mentioning the increases in solid and liquid fuels (2%), tourism and hotel and catering (1.9%) – the latter with a strong seasonal effect – and unprepared foodstuffs (1.6%), due to the increases in fresh fruit (7.6%) and potatoes and derivative products (3.9%).
The highest rates of inflation in July were posted by the regions of Cantabria (2.6%), Murcia (2.3%) and the Basque Country (2.2%), while the lowest rates of inflation were posted by Melilla (0.2%), the Canary Islands (0.6%) and Ceuta (0.9%).
In July, the year-on-year Consumer Price Index at constant tax rates fell by 0.3 percentage points to stand at -0.2%, while the core inflation rate also fell by 0.3 percentage points to -0.3%. In the index at constant taxes, the annual rate of energy stood at -3.1% (-1.8% last month) and of fresh food at 6.3% (4.3% in June). Within the nucleus of core inflation at constant taxes, the prices of non-energy industrial goods dropped by 1.9% (-0.7% in June), prepared foodstuffs rose by 1.8% (1.7% last month) and the price of services fell by 0.1% (the same as in June).
The National Statistics Institute also published the harmonised CPI (HCPI) for July, the annual rate of which stands at 1.9% (0.3 percentage points lower than in the previous month). When comparing this figure with the year-on-year rate estimated by Eurostat for the Eurozone as a whole (1.6%), the negative difference for Spain would decrease by 0.3 percentage points to stand at 0.3%.
In short, the month-on-month and year-on-year relative price index rates have fallen, as has the rate of core inflation. The differential with the Eurozone has also improved. Hence, the successive price increases generated by the fiscal consolation measures in 2012 are starting to ease and it can be expected that this process will continue over the months ahead. The consequent reduction in the inflation rate, along with the continued wage moderation, will continue the recovery of Spain’s competitiveness with its business partners, encouraging export growth, and the recovery of production and employment.
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