• Core inflation, which excludes the most volatile elements of the CPI, increased one tenth, to 1.4%
  • The Consumer Price Index (CPI) decreases 0.2% in July compared to the previous month

The Consumer Price Index fell in July by two tenths compared to the previous month, although in the interannual rate there was an increase of three tenths, up to 2.2%, mainly due to the increase in medicines and other pharmaceutical products such as consequence of the changes in the copayment rules for these products and not due to price increases.

The month-on-month drop in the CPI in July is explained by the notable decrease in the prices of non-energy industrial goods and, to a lesser extent, of food, which have been more intense than the growth in energy products and services. The prices of non-energy industrial goods decreased by 2.9% in the month (mainly due to the decrease in clothing and footwear by 12.2% due to the summer sales), although lower than the decline of a year ago ( -3.8%).

The prices of energy products increased by 3.2% in the month, especially due to the evolution of their main item, fuels and fuels (3.1%) and the upward revision of the electricity rate (3.4%) . Food remains almost stable in July, decreasing 0.1%, and services increase their prices 0.5% in relation to June, which mainly responds to intercity transport (2.8%) and tourism and hospitality (1.8%).

In the interannual rate, the CPI increased three tenths and stood at 2.2%. This upward trend is due to the sharp increase in the prices of non-energy industrial goods and energy prices, which has not been fully offset by the slowdown in food and services.

Compared to a year earlier, within the major CPI groups, energy products and non-energy industrial goods increased their growth rate. The former place its annual rate at 7.8%, that is, 1.6 percentage points more than in the previous month, an acceleration registered by all its components. Non-energy industrial goods increased their interannual rate by nine tenths, up to 1%, due to the effect of the regulatory change in the payment of medicines and not due to increases in the prices of these products. This upward step on the annual rate will disappear in July 2013. Within this group, the reduction of the annual rate of clothing and footwear by two tenths, to 0.2%, stands out, which may respond to a greater intensity of the sales.

On the contrary, the moderation of the annual rate of food stands out in six tenths, up to 2.8%, to which its two main components have contributed. Processed food registers an annual rate of 3.2%, compared to 3.8% the previous month, a slowdown that is largely due to the effect of the tobacco price increase of a year earlier. Fresh foods reduce the annual rate by half a point, up to 2%, as a consequence of the decrease in vegetables and poultry and sheep meat.

Services cut their annual inflation rate by two tenths, up to 1%, due to the evolution of tourism and hospitality and telephony; The price of intercity (air) public transport and, to a lesser extent, urban, act in the opposite direction.

Core inflation increased one tenth, to 1.4%, due to the strong growth of non-energy industrial goods. On the other hand, its other two major components – services and processed foods – decrease their year-on-year growth rate.

The rise in the annual inflation rate in July was exclusively due to the singular fact of the change in the regulation of financing for medicines, which had an impact on the index of three tenths. Without this change, global inflation would have remained at 1.9% in the previous month, despite the strong upward trend in energy products; and core inflation would have decreased.

The INE has also published the harmonized CPI (IPCA) for July, whose annual rate stands at 2.2%, four tenths above that registered in the previous month. This rate coincides with that of the IPCA leading indicator published on July 30. When compared to the estimated annual rate for the Monetary Union, the differential would continue to be favorable to Spain by two tenths, compared to -0.6 percentage points the previous month.

In summary, the price index for the month of July has been strongly influenced by the regulatory changes regarding the financing of medicines, without the price of the same having increased. This is a step effect on the index that will correct after 12 months. Apart from this effect, inflation maintains the stability trend of the preceding months.

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