The underlying rate skyrockets to 7.5% in January, according to advanced data from the INE, which covers the free electricity and gas markets
The Spanish economy is moving away from the worst signs that only a few months ago clearly signaled a recession. Inflation will, however, remain the main concern for the government’s economic management in the new year. And it is that, according to preliminary data from the National Institute of Statistics (INE), inflation rejected January – the first month with the end of the fuel discount – at 5.8%, from 5.7% in December.
This evolution is mainly due to the fact that fuel prices are rising more than in January 2022, as the fall in clothing and footwear prices is less than last year. Conversely, the drop in electricity prices is striking, stronger than a year ago.
That tenth of an increase in the general rate is funneled more strongly to the core (the most persistent inflation, by ignoring the most volatile commodities such as energy or unprocessed foods such as fruits or vegetables). Specifically, the indicator shot up to 7.5% in January, compared to the 7% recorded in December. This is the highest rate since December 1986.
As indicated by the INE, the gap between core inflation and general CPI widened to 1.7 points in January 2023. It is the biggest ‘gap’ since May 2020. And that’s despite the data being produced in a month when The VAT reduction on basic foodstuffs approved by the government is already in effect, with the tax on products that already had the reduced rate of 4% suspended and reduced from 10% to 5% that of oils and pastas.
The government has proposed to maintain the VAT cut until June or even earlier if the underlying rate falls below 5.5%. So, and according to the advanced data, the rate should still be down 2 percentage points.
In any case, the first studies on the impact of the measure indicate that it will not bring major savings to families. According to calculations by Fedea, only 6 euros per month per household.
The January 2023 CPI uses weights from the National Accounts for the first time and takes into account the free gas and electricity market.
In the weighting structure for 2023, the groups that are given the most weight are Medicines, Transport, Leisure and Culture and Other. And the ones that lose weight are Food, Housing and Clothes and Shoes
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
