Inflation rises to 5.8% in January after end of fuel subsidies

The spike in the annual inflation rate in January breaks five months of moderation in the evolution of price increases after the peak of 10.8% reached in July. The INE links this rise in inflation in January to the rise in fuel prices, higher than in January 2022, and to the fact that the drop in prices of clothing and footwear has been lower than last year. In contrast, the drop in electricity prices, higher than in January 2022, stands out.

In this CPI, the INE explains, the free gas and electricity markets are incorporated for the first time, thus extending the coverage of these services. Likewise, the National Accounts are now used as the main source in the structure of the weightings, i.e. the weight of each product or service in the CPI calculation, instead of the Household Budget Survey, as was the case until now. The Ministry of Economic Affairs has assessed that the year-on-year rate has risen by only one tenth of a percentage point, despite the withdrawal of the general fuel price subsidy, and that it remains at its lowest level since November 2021.

As for core inflation, the government expects it to peak in the first quarter and "follow the downward path of headline inflation and energy and other commodity costs". On 31 December, the compulsory discount of 20 cents per litre of fuel - petrol and diesel - for all consumers came to an end and now only applies to road hauliers. And from 1 January, the elimination of VAT on staple foods and the reduction by half, from 10% to 5%, on oils and pasta began to be applied. In annual terms, consumer prices fell by 0.3 % compared to December.

As for the harmonised index of consumer prices (HICP), the estimated annual rate of change was also 5.8 %, three tenths of a percentage point higher than that recorded the previous month. For its part, the estimated monthly change of the HICP is a decrease of 0.5%. The final figure for January will be known on 15 February.