• Industrial goods and services, especially tourism and hospitality, raise core inflation by one tenth
  • The differential with the euro zone widens one tenth, to 0.9 points favorable to Spain, which improves competitiveness

The Consumer Price Index (CPI) decreased 1% in December in the interannual rate, according to figures published by the National Statistics Institute (INE). This fall is one tenth less than the one advanced at the end of that month. The reduction is, therefore, six tenths compared to that of November, an evolution that is explained by the more volatile components of the CPI, especially energy products. In relation to the previous month, the general CPI decreased 0.6% in December, compared to the 0.1% increase registered in the same month of 2013. After this result, the average annual CPI rate for 2014 stood at -0.15%, compared to the advance of 1.4% in 2013.

The prices of energy products registered a year-on-year rate of -8.5% in December, a drop more than five points higher than the previous month (-3.2%). This greater fall is exclusively due to the heading of fuels and fuels, which intensifies the interannual fall rate by 7.3 points, to 11.8%, in line with the sharp drop in oil prices. In contrast, the annual rate of the electricity tariff increased by half a point, to 0.8%, after a 0.5% month-on-month rise.

The year-on-year rate of change in unprocessed food prices fell 1.6 points in December, down to -0.4%. This moderation responds to the intense fall of fresh vegetables and legumes (derived from a base effect) and other items such as crustaceans and molluscs, as well as some meats, including beef and pork.

Core inflation (excluding the most volatile elements of the CPI, fresh food and energy) increased by one tenth in December, until it canceled out. This acceleration is explained by BINES (non-energy industrial goods) and services, which increased their annual rate by one tenth, to -0.2% and 0.3%, respectively. The processed food remained at -0.2%.

Within the services group, the moderate increase in inflation responded to the heading of tourism and hospitality, whose annual rate went from 0.8% in November to 1% in December. This acceleration is explained, in turn, by the upward evolution of the organized travel item, which increased by 4.2%, 1.2 points more than in the previous month, and by intercity public transport, which doubled its rate annually, up to 1.4%.

The BINES prices increased their annual rate in December by one tenth, down to -0.2%, after staying at -0.3% for three consecutive months. This slight acceleration responds to the increase in the cost of automobiles and, to a lesser extent, to medicines and therapeutic materials. Processed food, including beverages and tobacco, registered an annual rate in December of -0.2%, the same as that of the previous four months, stability that is explained by the acceleration in items such as oil, mineral water and soft drinks and juices , which compensates for the moderation in milk and milk products and sugar. The annual rates of the rest of the items in this group show a certain tone of stability.

In month-on-month terms, the CPI decreased 0.6% in December, compared to the 0.1% increase in the same month of 2013. This decrease is explained by the lower cost of energy products, processed and unprocessed food and BINES, especially clothing and footwear, partially offset by higher prices for services, especially tourism and hospitality and intercity public transport. The prices of unprocessed food decreased by 0.3% compared to the month of November, due to the decreases in fresh fruits and pork. The prices of processed food decreased slightly, 0.1%, due to the lower prices of sugar and alcoholic beverages, offset by the increase in prices of oils and fats.

Energy products registered a 4.8% month-on-month drop in December, as a result of a 6.8% decrease in fuels and fuels, partially offset by the 0.5% rise in the electricity rate. BINES prices decreased 0.5% compared to the previous month, as a consequence of the seasonal decline in clothing and footwear (-2%). For its part, the price of automobiles increased 0.3% MoM.

The prices of services increased by 0.3% in December compared to the previous month, a rise that is mainly explained by the heading of tourism and hospitality (1%) and interurban public transport (1%). Within tourism and hospitality, the rise in prices for organized trips stands out (9%).

Of the 17 autonomous communities, four registered inflation rates above the national average in December: Catalonia and the Basque Country (-0.7% both), the Balearic Islands (-0.8%) and La Rioja (-0.9% ). Galicia had the same rate as the national average (-1%) and the rest of the communities had lower rates than the average. The lowest corresponded to Castilla-La Mancha, with -1.5%. The annual rate of the CPI for constant taxes stood at -1% in December, as did the general CPI, six tenths lower than the previous month.

The INE has also published the harmonized CPI (IPCA) for the month of December, whose annual rate stands at -1.1%, compared to -0.5% the previous month. If this rate is compared with that estimated by Eurostat for the euro area as a whole in December (-0.2%), the inflation differential favorable to Spain widens one tenth and stands at -0.9 percentage points.

In summary, the annual change in the CPI has decreased in December due to the evolution of the prices of energy products and unprocessed food, while core inflation has increased one tenth, to zero. Therefore, improvements in the purchasing power of incomes are maintained in a context of wage moderation, which together with the reduction of taxes and the creation of employment will give a greater boost to consumption and the growth of the economy. The inflation differential continues to be favorable to Spain vis-à-vis the euro area, which is making it possible to obtain competitiveness gains and boost our exports.

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