Inflation rate rises after basic foods VAT discounts removed

The inflation rate in Spain has risen by 0.3 percentage points in October to reach 1.8%, according to preliminary figures released on Wednesday by the National Institute of Statistics (INE).

After September saw the lowest inflation rate seen since since March 2021, the Consumer Price Index picked up slightly in October, but still remains below 2%. 

If confirmed, 2024 would see the lowest rate for any October since 2020 (-0.8% lower).

The INE puts the change down to the increase in fuel prices and also, although "to a lesser extent," the increase in electricity and gas prices, which fell in October 2023.

The increase has also coincided with the removal of the reduction in VAT on basic foods, which has been the case since October 1.

Products that previously had their VAT reduced to 0%, such as olive oil, milk, bread, eggs, cheese, fruit and vegetables, have been taxed at 2% since October 1. Pasta and seed oils, such as sunflower oil, have seen their VAT increase from 5% to 7.5%. 

Core inflation, which excludes more volatile items such as unprocessed food or energy products, rose by 0.1pp to 2.5%.