Prices go down by one tenth in August and set an annual inflation rate of 3% in Catalonia and the whole of Spain

Madrid (ACN) .- The fall in oil prices in recent months, which can now be experienced at petrol stations, has contributed to the reduction in prices. In addition, the effects of the VAT increase that was decided by the Spanish government in July 2010 are already being taken into account in the inter-annual rate of August 2011. The annual inflation rate in August, in Catalonia and the whole of Spain, has now seen its fourth consecutive month of decline and has been fixed at 3%. This is despite the relative price increase of 0.1 point in July, according to the Spanish Institute of Statistics.

Rising inflation in relation to July has been conditioned by the impact of peak prices in the tourism sector, which includes tours, hotels, cafes and restaurants. A sustained four months decrease in the annual inflation rate has not recorded by the National Statistics Institute (INE) since November 2008.

In the whole of Spain the prices in August rose by one tenth compared with July making the annual rate 3%. This figure does not match the predictions that anticipated an annual inflation rate of 2.9% at the end of August. This is the first time since November 2010 that inflation rate has changed course unexpectedly.  

Inflation rate within Catalonia

The annual inflation rate in Catalonia this August was 3%, a drop of 0.2 points in relation to the rate recorded in July, which was 3.2%.

Regarding the behaviour of prices by province, in the case of Barcelona, in August, price behaviour remained the same as the rest of Catalonia, increasing by one tenth compared with the July’s rate, and setting an inter-annual rate of 3%. According to these figures, the province of Barcelona has had two consecutive months of inflation decrease.

In the province of Girona, monthly prices rose by a tenth and the annual rate was fixed at 3.3%, the highest in Catalonia. Data from August represents a total of four months of consecutive inflation decreases in Girona.

In Lleida inflation also rose by a tenth in monthly terms, setting a yearly rate of 3.2%, again price fell for the fourth consecutive month.

Finally in Tarragona, prices were stagnant compared with the economic behaviour continued from July, marking the annual rate at 3%, a fourth successive month of declines.

Sector insight

The sectors that have conditioned the decrease of the annual rate for the fourth consecutive month are mainly related to transport, fresh foods and soft drinks, hotels, cafes and restaurants, medicines and pharmaceutical products and clothing and footwear, which experienced the last weeks of August sales.

The inter-annual rate of transport fell by four tenths from 7.9% to 7.5% between July and August in Catalonia. This index has been the consequence of the continued fall in the price of oil that had been recorded over the last few months.

Another explanation for economic contraction over a consecutive four month period can be found in the reduction in price in certain products of the fresh fruit and beverage sector that have been reduced by three tenths from 2.5% in July to 2.2% in August. Such products include fresh fruit and vegetables, legumes, potatoes, soft drinks, juices and other dairy products.

Another area that has helped to condition the behaviour of the low annual prices are hotels, cafes and restaurants. While in monthly terms prices were raised to account for a good tourist season, the yearly rate of this sector has fallen 0.4 percentage points from 2% in July to 1.6% in August.

The pharmaceutical industry has also contributed to falling prices in annual terms, directly affected by the Spanish Government's measures to reduce the deficit by way of reducing pharmaceutical expenditure. This year the rate of inflation has dropped by 0.6 percentage points to move from a negative rate of -0.1% to -0.7% in August.

Political connections to the price of oil

The reasons for the decline in the price of gasoline must be viewed within the context of political unrest in certain Arab countries that has generated uncertainty within the oil market. This has meant that whilst in April you could expect to pay $125 per barrel, the price now rests at closer to $110. This decline has already started to affect petrol stations, meaning that customers are beginning to notice the difference, although it is only a saving of a few cents.

Increased monthly prices

While the inter-annual inflation rate fell in August, prices in relation to the month of July recorded an increase of 0.1%. The sector which has driven down this behaviour has been the clothing and footwear industries, which are experiencing their last month of seasonal sales. Despite this, the decrease of clothing and footwear prices was unable to neutralise the increase in prices caused by sectors related to tourism. Prices related to leisure and culture increased by 1.6% in the last month, particularly due to tourist tours. Hotels, cafes and restaurants have increased prices by 0.5%.