Inflation in Catalonia in January up slightly to 5.3% despite VAT reductions

Inflation in Catalonia increased slightly in January to 5.3%, up from 5.2% in December, according to the latest figures from Spain's Statistics Institute made public on Wednesday morning.

This moderate rise – the first in five months – comes despite the VAT reductions on essential goods and coincides with the end of the 20-cent discount per liter of fuel subsidy.

Yet, inflation in Catalonia was still somewhat lower than the Spanish average of 5.9%, which turned out to be 0.2 percentage points higher than the estimated preliminary rate. 

6.9% core inflation

Core inflation, which does not include energy products or non-processed foods, soared to 6.9% in January, up 0.5 percentage points from December. This is the highest rate since records began in 2002. 

Similarly, across Spain core inflation was also up last month: 7.5%, the highest rate since December 1986. 

Moderately cheaper food

The cost of food products went down 0.2 percentage points as a result of the Spanish government's decision to lower the VAT on certain items — since January 1, bread, flour, milk, cheese, eggs, fruit, vegetables, legumes, potatoes, and cereals are taxed at 0%,  while the VAT on oils such as olive oil and fresh pasta has dropped from 10% to 5%.

Although prices have decreased from December, they are still 13.2% more expensive than they were a year ago. Foods that have gone up the most include sugar (+54.5%), milk (32.7%), and oils (+29.5%). 

Surge in fuel prices

The cost of fuel was up 11% year-on-year in January, significantly higher than the 5.6% year-on-year rate seen in December as the Spanish government subsidy came to an end. 

Meanwhile, footwear was also 4.6% more expensive than a year prior, while transport was up 5.3% and communications were 2.3%.