• Core inflation increases one tenth, to 0.7%
  • The inflation differential favorable to Spain with respect to the euro area stands at 0.9 percentage points

The Consumer Price Index (CPI) decreased by 0.6% in the interannual rate in July, a fall two tenths lower than in June, according to figures published by the National Statistics Institute (INE). This rate coincides with that advanced by the INE at the end of last month. The moderation in the fall of the CPI has rested, mainly, on the acceleration of the prices of unprocessed food, although services and non-energy industrial goods (BINE) have also contributed to this evolution. In the month-on-month rate, the general CPI decreased by 0.7% in July, largely due to seasonal factors related to the summer sales in clothing and footwear.

The prices of energy products registered a year-on-year drop of 12% in July, three tenths higher than that of June (-11.7%). This slight slowdown is explained by the evolution of electricity prices, which accentuated the rate of decline 1.4 points, down to -14.9%, while the heading of fuels and fuels registered a rate of -11.1 %, similar to that of the previous month (-11.2%).

Food inflation stood at 2.3% in July, nine tenths higher than the previous month, due to the rebound in the prices of unprocessed food, whose rate increased 3.4 points, to 5, 7%. This acceleration responds, to a large extent, to the strong increase in the prices of fresh fruits (14.4%) and of fresh vegetables (9.3%). In contrast, the rate of increase in processed food prices moderated slightly in July, two tenths to 0.8%, largely due to the evolution of the price of oils, which registered a year-on-year rate of 10 , 5%, 3.3 points lower than that of June.

Core inflation (excluding the most volatile elements of the CPI, fresh food and energy) increased in July by one tenth, to 0.7%, as a result of the acceleration in BINE prices (one tenth to 0.4 %) and services (two tenths up to 0.9%). The increase in the prices of organized trips stands out in this last group (0.7% year-on-year), after the decrease of close to 5% the previous month.

In month-on-month terms, the CPI decreased in July by 0.7%, a fall two tenths lower than that of the same month in 2015. The less contractive evolution of the CPI is due to the increase in food prices (0.6% month-on-month) ), compared to the decrease of 0.3% registered a year earlier. Services have also contributed to moderate the intensity of the fall, registering an inter-monthly rate of 0.7%, one tenth higher than that of July last year. The remaining general CPI components registered month-on-month rates lower or equal to those of a year earlier in July. BINE prices fell 3.9% month-on-month, as in July of last year, and energy products fell 1%, four tenths more than a year earlier.

Within the food group, the prices of unprocessed food increased 2.1% month-on-month in July, compared to the 1.3% decrease in the same month of 2015, while those of processed food decreased slightly (-0, 1%), after an increase of the same magnitude a year earlier. Of note, within unprocessed food, the rebound in fresh fruit prices (5.2% in July this year compared to the 2.4% decrease in July 2015).

The annual rate of the CPI has increased in July in all the autonomous communities, except in La Rioja, where it has remained stable. Eight of them registered rates lower than the national average, the lowest corresponding to La Rioja (-1%), Castilla-La Mancha and Castilla y León (-0.9% both). Andalusia, Madrid and Murcia registered the same rate as the national CPI (-0.6%). Among the communities with rates above the national average, the highest were recorded by Navarra (-0.3%) and Catalonia and the Basque Country (-0.4% both). The annual rate of the CPI for constant taxes stood at -0.6% in July, as did the general CPI.

The INE has also published the harmonized CPI (IPCA) corresponding to the month of July, whose annual rate stands at -0.7%, two tenths higher than the previous month. If compared with that advanced by Eurostat for the euro area as a whole in that month (0.2%), the inflation differential favorable to Spain decreases one tenth, to stand at 0.9 percentage points.

In summary, the CPI moderated the year-on-year decline in July for the third consecutive month, due to the acceleration in the prices of unprocessed food and, to a lesser extent, of services and BINE. Core inflation has increased by one tenth, to 0.7%, and the inflation differential favorable to Spain against the euro area remains close to one percentage point, with the consequent favorable effects on competitiveness and exports.

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