Prices rise one tenth in annual rate, up to 3.5%

• The increase responds to the evolution of some services, such as university fees, and oils
• Energy products moderate 2.2 points, up to 11.2%, the same as fresh food

The Consumer Price Index (CPI) increased in October by 0.8% compared to the previous month, which places its interannual rate at 3.5%, compared to 3.4% the previous month, according to published data today by the National Institute of Statistics (INE). This increase in the annual inflation rate responds, to a large extent, to the evolution of services and especially to the higher cost of university education.

Core inflation (which excludes energy products and fresh food) increased more sharply and stood at 2.5%, 0.4 points more than in September. This acceleration also responds to the service sector and, to a much lesser extent, to processed food where the rise in oils is being noticed.

Energy products, after the strong acceleration of the previous three months, moderate their annual rate by 2.2 percentage points, to 11.2%. Fresh food also reduced its annual rate, to 2.7%, one tenth less than a month earlier. Processed foods saw their rate increase by only one tenth, from 2.9% to 3%, since although oils rose from 0.6% to 6%, other items acted in the opposite direction (for example, tobacco, which was softened from 7.9% to 6.2%). The prices of services raise their annual rate by eight tenths, to 2.6%, a rebound that mainly responds to the rise in university education that has risen from 4.3% the previous month to 22.4% in October. Among the services, the jump in personal care services (from 1.6% to 4.1%) and the departure from hotels and other accommodation (from 0.9% to 1.4%) could also be highlighted. In contrast, non-energy industrial goods (BINES) maintained their annual rate at 2% within BINES, an increase in the rate of clothing and footwear is observed, from 0.2% in September to 0.4% in The following month, while in the opposite direction, automobiles fell from 2.5% a year to 1.6%.

The monthly CPI rate reflects a rise of 0.8%, which is explained by the notable growth in service prices (0.6%). This is also a consequence of the 22.3% rise in the prices of university education. BINES (3%) have also influenced, specifically for clothing and footwear (10.5%), due to the start of the autumn and winter season. The rise in oil (5.8%) has also boosted the whole of processed food. On the contrary, it is worth mentioning energy products that have decreased by 1.8%, as a result of the reduction of almost all of their items, with the exception of city gas, which has maintained prices. Also in this sense it is worth mentioning electricity (-1.9%), organized travel (-3.6%), hotels and other accommodation (-5.5%), automobiles (-0.8%) and fresh fish ( -2.2%).

The INE has also published the harmonized CPI (IPCA) for October, whose annual rate stands at 3.5%, the same as that registered in the previous month. When compared to the annual rate estimated by Eurostat for the euro area as a whole (2.5%), the differential would be unfavorable to Spain by one point, compared to 0.9 percentage points the previous month.

For its part, the CPI for constant taxes has also experienced an increase of 0.8% per month, which translates into an increase of one tenth of its annual rate, to 1.5%. Again, services is the group that sees its annual rate increase the most, from -0.2% in September to 0.5% in October, a behavior that is followed, although less intensely, by processed foods, which go from 1, 4% in September to 1.6% in October. Industrial goods also maintain their annual rate, in this case at -0.2%, while energy products see it decrease from 10.7% to 8.6%.

The evolution of prices in October reflects the impact of some marginal VAT remainder that was not passed on last September. Particularly noteworthy is the rise in university fees that have had an inflationary impact of more than a tenth, and also the continuation of the rise in some food products such as oil. In principle, these increases would have a transitory effect on the inflation rate, the impact of which will be discounted in October 2013.

Prices have remained modest in October, a trend that should strengthen in the coming months. Recent developments reflect the effects derived from fiscal consolidation measures, necessary to reduce imbalances in the medium term. The impact on prices is, therefore, transitory and will be absorbed in the coming months. This effect, together with the better performance of other products, allows us to anticipate a price trajectory more in line with the current situation of the Spanish economy.