• Both energy and unprocessed food explain a decrease in the CPI that is transitory
  • Core inflation remains stable for the fourth consecutive month, both for services and industrial goods
  • The inflation differential with the euro area is positive for Spain by 8 tenths, the same as in July

The Consumer Price Index (CPI) decreased 0.5% in August in the interannual rate, according to figures published by the National Statistics Institute (INE), in line with that advanced in late August. The reduction is two tenths in the annual rate compared to July and is largely explained by the evolution of the most volatile components of the CPI, energy products and unprocessed food, especially the former. In relation to the previous month, the general CPI increased by 0.2% in August, one tenth less than in the same month of 2013, mainly due to seasonal factors related to the tourism sector.

The year-on-year rate of change in the prices of unprocessed food decreased 0.2 percentage points in August, to -5.4%, an evolution that responds to the significant decrease in the prices of pork, poultry and sheep meat and fresh fruits. Fresh fruits increased the year-on-year drop rate by 1.4 points, down to -16.9%, after continuing to discount the strong rebounds experienced a year earlier as a result of poor harvests.

The prices of energy products registered an interannual rate of -0.9% in August, 1.2 percentage points lower than in July. Its main components, fuels and fuels, and the electricity tariff have contributed to this deceleration to a different extent. The annual rate of the electricity tariff has gone from 3.8% in July to 2.8%, as a result of a monthly rise of 2.3% in August of the current year, one point lower than that which took place in the same month of 2013 (3.3%). Fuels and fuels, meanwhile, have cut their interannual variation rate by 1.3 points, to -2.2%, an evolution in line with oil prices.

Core inflation (excluding the most volatile CPI elements, fresh food and energy) remained at 0.0% in August, for the fourth consecutive month. This stability has been reflected in the prices of services and BINES (non-energy industrial goods), which have remained at the July levels and, to a lesser extent, those of processed food, which have slightly increased the intensity fall. Services maintained their annual inflation in August at 0.2%.

The bullish items were tourism and hospitality and interurban public transport, with rates of 0.3% and 7.1%, respectively, one tenth and 1.3 points higher than the previous month. The rebound in interurban public transport prices is mainly explained by the rise in air transport prices. BIN prices also kept their annual rate unchanged in August, at -0.4%, with a slight intensification in the fall in clothing and footwear (one tenth), offset by the acceleration in the price of automobiles.

Processed food, including beverages and tobacco, reduced its annual rate in August by one tenth, to -0.2%. This greater drop is explained, to a large extent, by the items of milk, oil, alcoholic beverages and tobacco, which have reduced their annual rate by 6.3, 3 and 2 tenths of a percentage, respectively.

In month-on-month terms, the CPI increased 0.2% in August, which is explained by the increase in the cost of services and fresh food, partially offset by the moderation in those of the BINES. The prices of processed food and energy products did not change compared to the month of July, while those of fresh food increased by 0.7%, largely due to the increase in prices of fresh fruits (3, 2%), fresh fish (2.3%) and sheep meat (0.5%).

The prices of services increased by 0.4% in monthly rate, mainly due to tourism and hospitality (1.3%) and, within this heading, to organized travel items (5.4%) and hotels and other accommodation (0.8%), as well as interurban public transport (1.5%), especially by air transport (2.9%). For their part, the prices of energy products did not change in August compared to the previous month, since the drop in fuels and fuels (-0.9%) was offset by the rise in the electricity rate (2.3%) . BINES prices decreased 0.3% MoM, which essentially responds to the fall in clothing and footwear (-1.3%) due to the effect of the summer sales, partially offset by the rise in the price of automobiles (0.4%).

Of the 17 autonomous communities, five registered an annual inflation rate in August higher than the national average. The most inflationary were: Balearic Islands (0%), Catalonia (-0.1%), Madrid and the Basque Country (-0.3%) and Galicia (-0.4%). The rest of the communities present rates lower than the national average: Extremadura (-1.1%), Castilla-La Mancha (-1%), Murcia (-0.9%), Andalusia and Navarra (-0.8%) , Asturias, La Rioja, Canarias and Castilla-León (-0.7%) and Cantabria, Aragón and Comunidad Valenciana and (-0.6%).

The annual rate of the CPI for constant taxes stood at -0.5% in August, as did the general CPI, two tenths lower than the previous month. The underlying constant tax has remained at 0%. The annual rate of energy was -0.9%, compared to 0.3% in July, and that of unprocessed food was -5.4% (-5.2% in July ). Within the core of inflation underlying constant taxes, BINES prices have remained at -0.4% year-on-year, processed foods decreased 0.2%, compared to the stability of the previous month, and of services remained at 0.2% in the previous month.

The INE has also published the harmonized CPI (IPCA) for August, whose annual rate stands at -0.5%, one tenth lower than the previous month. If this rate is compared with that estimated by Eurostat for the euro area as a whole (0.3%), the inflation differential continues to be favorable to Spain, at 0.8 percentage points, as in the month of July.

In summary, inflation has decreased in August due to the evolution of the prices of its most volatile items, while core inflation stabilizes for the fourth consecutive month. The reduction in general inflation is therefore considered transitory within a general pattern of price moderation. This situation has a favorable impact on the purchasing power of income and consumption. Likewise, it facilitates the continuation of wage moderation and competitiveness, with the consequent positive impact on exports, which guarantees the continuity of the recovery of production and employment.

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