What was predicted has been fulfilled. The increase in VAT on electricity has a price and has resulted in this rise in inflation in the month of March. They are four tenths more, which places it at 3.2% year-on-year, the rate already indicated by the data anticipated by the INE. On the other hand, the moderation in food prices stands out, one point less than the previous month, reaching 4.3%, which is its lowest rate in more than two years, to be exact since November 2021. In this way, a gradual process of returning food prices to normal is certified, although 4.3% is still a high rate.
It is electricity and fuels that have caused this rebound. Electricity due to the increase in VAT on electricity, which has returned to its usual levels of 21%, after being lowered for a long time first to 5% and later to 10%. The effects of this increase are largely responsible for this rise of four tenths in March. Specifically, this return to normality of the VAT on electricity is responsible for three of the four tenths of the rise in inflation in March.
Curiously, this increase in VAT on electricity has occurred due to the fall in the wholesale price of electricity. By dropping below the limit of 45 euros MWh, the return to the 21% VAT was automatically activated, something that already happened in both February and March.
Meanwhile, food has played in the opposite direction. It is true that they have risen, but less than in the same month last year, which means that the interannual rate has reduced. It remains at levels from two years ago. You have to go back to November 2021 to find a lower rate, then it was 3.3%.
This moderation is largely due to the drop in prices of legumes and vegetables and other products that increased in March of last year. The rise in the price of meat also influences, which is lower than that of the same month in 2023. On the other hand, olive oil remains intractable, with a year-on-year increase of 70%, even above the increase in February. Another piece of information that supports this process of moderation in food prices is the month-on-month rate. It has only increased by one tenth between February and March of this year, which confirms this gradual deceleration.
The escalation of food began in November 2021, an escalation that has meant living for two years with skyrocketing prices, which reached their ceiling in early 2023 and since then began a gradual, but slow deceleration. The bill continues to be burdensome every time we visit the supermarket. In February, it was 5.3% and now, one point less, 4.3%. Certainly high percentage, but it shows the clear effects of moderation.
On the other hand, core inflation, which does not include energy or fresh food, continues to moderate, and has fallen two tenths, reaching 3.3%, that is, practically at the same level as the index in general. It is the lowest rate in the last two years. The two rates coincide after a long time with different trajectories. The general rate, much more volatile, began its rise earlier and also its subsequent moderation, while the underlying rate, more reliable as an indicator of underlying trends, began its rise later, but has also taken much longer to reduce. It is an extremely slow process.
"Food tends to be moderated, including something more than what we had planned. On the other hand, what continues to worry us are the services, which continue to increase," says María Jesús Fernández, from Funcas. For his part, Oriol Aspachs, from CaixaBank Research, assesses the behavior of underlying inflation positively, with the current 3.3%, which is less than half of the 7% it reached last year. "The underlying inflationary trends are clearly moderating," says Aspachs.
In the coming months, the forecast is that general inflation will continue to experience ups and downs, with increases in the coming months and decreases later. Funcas and CaixaBank Research place this year's average inflation between 3 and 3.2%.
From the Ministry of Economy, they highlight that "the purchasing power of families and the competitiveness of Spanish companies continue to improve", and that the data demonstrate the ability of the economy to make growth compatible with price moderation and support for the most vulnerable. .
