Alex Trelinski
SPAIN’S annual inflation rate has sharply fallen to 2.8% in July, compared to 3.4% recorded in June.
The National Institute of Statistics(INE) says the rate is at its lowest since last February.
Core inflation which strips out fresh food and energy prices has gone down to 2.8%- 0.2% lower than June.
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It’s the lowest core rate in over a year and is broadly in line with expert forecasts.
“The change in the overall rate is down to a fall in electricity and good prices over the last 12 months, and to a lesser degree in leisure and culture, “ the INE explained.
Forecasters believe that rates at around 3% are expected to close the year which will have an average rate of around 3.2%.
VAT reductions on electricity bills were phased out this year, which means that the fall in power prices has been helped by lower raw wholesale costs.
The sharp July drop is better than expected according to Raymond Torres, director of Economic Situation at Funcas.
The core CPI rate is as predicted ‘evidencing the resilience of prices in the services sector’.
The main problem lies in this component, which is ‘resilient to the downside due to the strong demand associated with tourism and, in some sectors, the lack of competition’.
This factor according to Torres is the main obstacle to inflation falling to around 2%..
