These products remain expensive in Spain despite price moderation

by Lorraine Williamson
price increases
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MADRID – Everyone feels it: shopping is still much more expensive since the energy crisis and war broke out in Ukraine. Foods continue to show the highest inflation rates. 

Yet last June, the CPI of food and non-alcoholic beverages fell to its lowest level since last spring by 1.7 points from the previous month to 10.3%. The growth rate of prices in this category is more than five times higher than the overall index, which stalled at 1.9%. 

Two products cheaper than a year ago 

Of the nearly 50 food products included in the shopping basket monitored by INE, only two have become cheaper in June compared to the same month last year: fresh fruit and edible oils other than olive oil. This development is due to a fall in energy prices and, above all, to an increase in supply compared to last year. 

Also read: Inflation in Spain below 2% for the first time since early 2021 

In the northeast, where a lot of summer stone fruit (nectarines, peaches and apricots) is produced, the usual harvest size has been reached again after a sharply reduced harvest in 2022 due to spring frosts. This, together with a drop in consumption (particularly noticeable with fruits such as Paraguayos) contributed to the reduction. 

Sunflower oil 

Of the oils, sunflower oil in particular is cheaper than a year earlier and shows a decrease of 34%. Whereas sugar continues to maintain an increase of around 50%. 

Sugar increased most in price 

In contrast to these only two product categories with negative variations, there is a major food group that continues to show increases well above the food group’s average inflation rate. Sugar has risen the most, nearly 45% from last year. 

This price increase is due to a reduction in supply due to successive bad seasons across Europe caused by drought and a decrease in production due to a drop in profitability. 

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Olive oil 

Olive oil registered an annual price increase of 31% in June. Here, too, the increases come from the past, as the first increases above 25% took place in August 2021. As with sugar, two years of production reduction due to drought explain the price increases, which do not appear to be reversing in the short term. 

Potatoes 

The third product with the highest inflation rates last month was potatoes, which reached 27.5%. This is the result, says Alberto Duque, producer and former president of COAG in Valladolid, of that “perfect storm” caused by the rise in energy prices and, especially this year, in fertilisers, which have risen by more than 350%. 

“However, prices for consumers should now be up to 30 cents cheaper than a month ago, as distribution has massively imported potatoes from Egypt, which have softened Spanish market prices. Unfortunately, this drop has only affected farmers’ wallets. The intermediaries have also benefited and in the meantime, consumers have not noticed anything at all.” 

Rice and milk 

In addition, rice shows price increases of almost 22%, and milk and its derivatives continue to show sharp increases, mainly caused by the increase in animal feed prices due to the drought and more expensive feeds. The price of whole milk and butter is 20% higher than in June last year. 

The effect of the VAT reduction 

The evolution of food prices during the first semester has also been influenced by the VAT reduction on basic products in the shopping basket. It was introduced by the Spanish government at the beginning of the year and has now been extended until the end of 2023. These included basic foodstuffs such as bread, flour, milk, cheese, eggs, fruit, vegetables, legumes, root vegetables and grains. Until the end of this year, these products are subject to a VAT rate of 0%. 

Pasta and oils will also benefit from a reduction from 10% to 5% for another semester. If this effect of the tax cut, which the government says will enable households to save up to €1.320 million this year, is removed, food inflation would have been 11.7% in June, almost one and a half percentage points higher than the official facts. 

Also read: VAT reduction on essential products in Spain has hardly any effect 

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