The partial withdrawal of the VAT reduction on food in October had a limited impact on consumers’ pockets. The price of the products that make up the bulk of the shopping basket accelerated its rise very slightly compared to September. Food inflation rebounded in the tenth month of 2024 to 1.9% year-on-year. Thus, it interrupted the trend of previous months, in which the CPI for these basic products accumulated five consecutive drops until reaching three-year lows. This is clear from the final data of the Consumer Price Index (CPI) published this Thursday by the National Institute of Statistics (INE), which confirms a slight rise in the headline inflation rate to 1.8%driven mainly by the increase in fuel prices and, to a lesser extent, also electricity and gas.
Food inflation thus advanced just one tenth in October compared to the 1.8% rate registered in September, its lowest level since 2021. Last month was marked by the partial withdrawal from day 1 of the VAT bonus of food applied by the Government to cushion the impact of inflation on consumers’ pockets. The tax on basic products such as olive oil, milk, bread, eggs, cheese, fruitvegetables, legumes, cereals and flour went from 0% to 2%, while the tax rate on pasta and seed oils rose from 5% to 7.5%.
Regarding the general index, prices slightly accelerated their pace of increase in October and closed the month 1.8% above the level recorded a year ago. Thus, the CPI broke four months of consecutive declinesafter having recorded an annual rate of 1.5% in September, its lowest level since March 2021, before the Russian invasion of Ukraine and the consequent inflationary crisis. Even so, it still remains below the 2% target pursued by the European Central Bank (ECB) and far from the 3% threshold exceeded during practically the entire first half of the year. The president of the ECB herself, Christine Lagarde, anticipated an increase in the CPI in the eurozone towards the end of the year after the October meeting of the monetary authority, in which the third cut in interest rates so far this year was undertaken. until leaving them around 3.25%.
According to the INE, this rise in inflation in October was fundamentally due to increases in the price of fuel and, to a lesser extent, also electricity and gas. In fact, by excluding energy and unprocessed foods from the calculation given their high volatility, Core inflation rose just one tenth in the interannual rate to stand at 2.5%. This slight increase – the first since May – was enough to abandon what was its lowest level since September 2022. For the third consecutive month this indicator was above the general index.
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