• Core inflation stands at 1%, driven by the slight acceleration in service prices
  • The differential favorable to Spain against the Eurozone improves one tenth, to 0.8 percentage points

The Consumer Price Index (CPI) decreased by 0.8% in the interannual rate in February, according to figures published by the National Statistics Institute (INE), as it had advanced at the end of last month. The reduction is, therefore, five tenths compared to the January rate, and is mainly explained by the drop in the prices of fuel and unprocessed food. In relation to the previous month, the general CPI decreased 0.4% in February, compared to the 0.2% increase in the same month of 2015.

The prices of energy products registered an interannual rate of -14.1% in February, almost four points lower than that of January (-10.3%). This drop is due both to electricity, whose rate has decreased by 14.2% (-13% in January), and to the departure of fuels and fuels, which has intensified the rate of decline by five points, down to -14 , 2%, in line with the evolution of crude oil prices. However, the latter rate also reflects a significant base effect, as fuel prices increased in February 2015 by 5.2% compared to January of the same year. The year-on-year rate of change in food prices stood at 1.2% in February, seven tenths lower than in January, mainly due to unprocessed food, the rate of which stood at 0.8%, compared to 3.3% in January, this slowdown responding, to a large extent, to the decrease in the prices of fresh vegetables (-9.8%).

Core inflation (excluding the most volatile CPI elements, fresh food and energy) increased one tenth in February, to 1%, due to the slight acceleration in service prices, the rate of which increased three tenths to 1.3% YoY. This evolution was the result of a heterogeneous behavior of the games that comprise it. Thus, the prices of urban and interurban public transport continued to fall, due largely to the lower prices of fuels, to -0.6% and -1.4%, respectively, compared to -0.5% and -1 , 1% in January. On the contrary, the rate of telephone services doubled, standing at 3%, compared to 1.5% the previous month, and that of tourism and hospitality increased two tenths, up to 1.5%. Among the other components of core inflation, processed food registered a rate of 1.3%, one tenth lower than that of January, and Non-Energy Industrial Goods (BINE) maintained their rate unchanged compared to that of the previous month (0.5%).

In month-on-month terms, the CPI decreased by 0.4% in February, after the 0.2% increase in the same month of 2015. This decrease is explained by the lower cost of energy products and unprocessed food, with rates of -2.9% and -1.6%, respectively. The decrease in the prices of fresh fish and fresh fruits stands out in this second group, partially offset by the rise in the price of fresh vegetables. To a lesser extent, BINE prices have also contributed to the month-on-month decrease in the CPI, with a negative monthly rate of -0.3%, mainly due to the seasonal fall in clothing and footwear (-1.6%). For their part, the prices of processed food increased by 0.1% and those of services by 0.4%, with a decrease in the prices of urban and interurban public transport of -0.1% and -2, 2%, respectively, offset by the increased cost of communications (1.5%) and of hotels, cafes and restaurants (0.4%).

The annual CPI rate decreased in February in all the autonomous communities. Ten of them registered rates higher than the national average, the highest rates corresponding to Catalonia and the Basque Country (-0.5% both). Among the communities with CPI variation rates below the national average, the lowest rates were registered in Castilla-La Mancha (-1.4%) and Castilla y León (-1.2%). The annual rate of the CPI for constant taxes stood at -0.8% in February, as did the general CPI.

The INE has published the harmonized CPI (IPCA) for the month of February, whose annual rate stands at -1%, compared to -0.4% the previous month. If this rate is compared with that advanced by Eurostat for the euro area as a whole in that month (-0.2%), the inflation differential favorable to Spain widens one tenth, standing at -0.8 percentage points.

In summary, the annual variation rate of the CPI has decreased half a point in February due to the evolution of the prices of its most volatile elements, energy and fresh food, although in February the indirect effects derived from the lower cost of crude on the Spanish inflation. Specifically, it highlights its impact on public transport, both urban and interurban. Core inflation increases one tenth, up to 1%, due to the increase in service inflation. The inflation differential favorable to Spain vis-à-vis the euro area improves one tenth, favoring competitiveness gains and boosting our exports.

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