Food inflation falls below 10% for the first time in 18 months
Shopping basket inflation resumed its downward path in October and fell to 9.5%, which is the first time that this indicator has fallen below the double-digit barrier in 20 months.. This has been confirmed by the National Institute of Statistics (INE), which published this Tuesday the definitive Consumer Price Index (CPI) figures for the month of October.
Food inflation had barely moved since last June, when it stood at 10.3%. After a slight rebound registered in July, the increase in prices in the shopping basket had stagnated at around 10.5%. A downward resistance motivated in part by the sharp increase in the price of olive oil, which, however, has continued to rise in price and now costs twice as much as it did just two years ago.
Of the 55 food categories for which the INE monitors prices, inflation has been reduced in 40 products, has risen in 13 and has remained stable in two others.. The most striking slowdown in the price increase is that registered by sugar, which has gone from an inflation of 40.5% in September to 12.3% in October. The decline is motivated by the strong 'step effect' that occurred in October last year, when inflation when prices shot up by 42.8%.
Although it seems that inflation continues to ease, there are still 23 foods with price increases of more than 10% year-on-year. The most notable is olive oil, which costs 73.5% more today than a year ago. Confectionery products appear far behind, with a price increase of 17%; rice (16.6%); juices (16.1%); potatoes (15.9%); jams; jams and honey (15.9%); cereals (15.1%); pork (13.8%); soft drinks (11.8%); whole milk (11.6%); baby food (11.2%) or fish (10.3%) to name the most notable.
On the opposite side of the spectrum there are already foods with price increases that can be considered normal. We are talking, for example, about flour (0.5%), pasta (0.8%), frozen seafood (1.3%) or poultry (2.3%).. The rest of the edible oils deserve special mention, the price of which in October was 29.5% lower than that of a year ago.
General inflation remains stable
In addition, the statistical institute has confirmed that the general CPI index remained stable at 3.5%. A figure that, when the first advance was known at the end of last month, was a positive surprise.. For its part, the underlying indicator – the one that deducts energy and unprocessed food prices from the calculation – fell to 5.2%, its lowest level since June 2022.
The Ministry of Economic Affairs makes a positive reading of the data and points out that it has been the economic policy measures adopted by the Government that have allowed Spain to maintain “one of the lowest inflation rates and greatest economic growth in the euro zone.”
Food has not been the only force that has pulled down inflation. In fact, the relief in transport prices has been the main counterweight to the electricity bill, which, although still cheaper than last year, increasingly hurts the general index as the step effect disappears.
Transportation inflation fell to 1.4% in October from 3.8% in September. A decrease driven by the slowdown in fuel prices, which have gone from costing 6.5% more than last year in September to 1.2% last month. The evolution of this component will be one of the keys that the European Central Bank (ECB) will keep in mind when it decides whether or not to raise interest rates again next December.
The other side of the coin, the one that is preventing inflation from falling further and will continue to make it difficult in the coming months, is the electricity bill.. The price of electricity was still 7.7% below the level recorded last year in October. However, the lower year-on-year price of electricity is decreasing month by month as the favorable effect of the sharp price drops experienced at this time last year fades.
To this factor we must add that the energy support measures introduced by the Government will end in December of this year if they are not extended.. Currently, the taxation of the electricity bill is practically at the legal minimum thanks to tax reductions. The Government has not yet clarified what it intends to do with the package of support measures and is not closing the door on extending some of the measures or introducing new ones.. However, it will be very difficult to maintain the anti-crisis package as it currently stands if it wants to comply with the European Union's fiscal rules, which will be active again in 2024.