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Core inflation in Spain hits record not seen since 1986

Core inflation in Spain hit a new record in February, a level not seen in the last 37 years, despite all price containment measures implemented by Sanchez’s left-wing government.

Inflation in the Iberian country rose by 6.1% in February compared with the same month of 2022, fresh data released on Tuesday by the National Statistics Institute (INE) revealed.

The new rate represents a rise of two-tenths of a percentage point compared with that recorded in January when the variation was 5.9%, the INE explained.

Therefore, the upward trend recorded in the first month of the year, when five consecutive months of slowing price rises ended, is maintained.

Electricity and energy costs were the two main drivers of this new spike in Spain’s inflation, state-owned INE stressed in a press release.

In addition, food and non-alcoholic beverages increased more than in February last year, it added.

Of particular concern for the government is core inflation (which does not consider unprocessed food or energy products), which also increased by two-tenths of a percentage point to 7.7%, the highest rate since 1986.

The latest increase in core inflation raises the risk of long-lasting inflation taking root in the Spanish economy and making it more difficult to combat it, Cinco Días reported.

On the other hand, the INE stated that the prices of fuel and lubricants, which had risen in February 2022, and of combined passenger transport fell, compared with the stability of the previous year.

Compared to January, consumer prices recorded a 1% increase on a monthly basis, according to the leading indicator of the Spanish Consumer Price Index (CPI).

The Spanish government has implemented several measures to curb inflation, among others, a reduction, and in some cases the elimination, of VAT on some foodstuffs.

“The government is going to ensure that VAT reductions and aid to farmers are transferred directly and immediately to food prices,” Prime Minister Pedro Sánchez (PSOE/S&D) said on 4 January when presenting the third package of measures to mitigate the economic fallout of the war in Ukraine, for the next six months.

Basic foods taxed at 4% in 2022 are now VAT exempted, and others taxed last year at 10% were downgraded to a 5% VAT rate, among other alleviating measures.

Municipal elections will be held in May in Spain, with general elections due in December.

Source : Euractiv