Inflation debuts in 2024 with a year-on-year increase of 3.4%, three tenths more than in December, according to the leading indicator of the Consumer Price Index (CPI), which will not be confirmed until next February 15, and may suffer slight upward or downward alterations.
Inflation is once again registering increases after two consecutive months of moderating and is from 3.5% in October. The data reflects the increase in electricity prices compared to the decrease they experienced in January 2023. Fuels, on the other hand, are pulling the indicator down, whose prices are now falling when they rose in January 2023. On a monthly basis, prices rose 0.1% in January compared to December.
The core CPI, which does not take into account the more volatile evolution of unprocessed food and energy prices, instead falls two tenths to 3.6%, which represents the lowest rate since March 2022 and leaves the differential with the general indicator at only two tenths.
The general CPI for January is one tenth above the figure estimated by Funcas experts, who predicted that the CPI, main indicator of price inflation, will rebound this January punctually and they expect it to remain above 3% throughout 2024. The evolution of food prices will fluctuate and will depend largely on weather conditions.
Taxes and the rise in electricity
Electricity has risen slightly each year. The average price of electricity in the pool stood at 73.76 euros MWh in January, compared to 69.55 MWh in 2023, which represents an increase of 6%. However, this price only affects those who buy cash, which is a small percentage, because more than 80% of the electricity is sold at a fixed price.
The rise in inflation in January is due, to a large extent, to the fact that the Government withdrew the support measures to contain the increase in the electricity bill contemplated for alleviate inflationary tensions after the war in Ukraine that took the CPI to its highest levels in almost 40 years, standing above 10%.
Thus, the Government has withdrawn the VAT reduction on electricity that was at 5% and has raised it to 10% for holders of electricity supply contracts, whose contracted power (fixed power term) is less than or equal to 10 kW.
It has also repealed the reduction in the Special Tax on Electricity: it is now at 2.5%, compared to 0.5% in December. In addition, it has eliminated the 0% suspension of the Tax on the Value of Production of Electrical Energy (IVPEE), which is now at 3.5%.