Since the VAT reduction on certain basic foodstuffs early this year, grocery prices in Spain have risen less. Furthermore the support measures will be extended, Minister Calviño confirmed today after the Council of Ministers meeting.
New support measures, extension of some existing measures and an end to others that expire on 30 June. The Council of Ministers today (Tuesday) approved the Royal Decree that extends some initiatives in the fields of energy, housing, transport and taxes intended to cushion the economic impact of the war in Ukraine and the inflation crisis. The Cortes permanent delegation will consider the validation or withdrawal of all the measures announced on Tuesday, which together form the seventh aid package.
Among others, the VAT discount on basic foodstuffs and the subsidy for public transport will be extended until 31 December, while the automatic six-month extension of rent contracts with the same conditions will also be ended.
The measures announced, Economy Minister Calviño explained, will entail additional costs of €3.8 billion, bringing the total impact in the second half of the year to €8.9 billion. When all aid packages are added together, the fiscal cost is €47 billion.
Price hikes decline
Apart from the tax cut itself, the reason for the lower price hikes is also the drop in fuel and energy prices in recent months, following tensions in most of 2022 due to the war in Ukraine. But despite the reduction, high prices still proved to be a heavy burden for the neediest households. And while the VAT rebate and the spread effect ensured lower prices, the drought drove up prices for pulses, vegetables, potatoes and cereals.
Analysis of figures published by the National Institute of Statistics (INE) shows that the price of bread experienced the most favourable trend. After rising by 15.4% at the end of last year, the price increase levelled off to 7.1%. The price rise of flour fell from 36.8% to 10.7% and that of eggs from 29.8% to 13.2%. Fruit price growth fell from 7.3% to 4%, while milk price growth fell from 37.3% in December to 24.3% in May. And after closing with a year-on-year increase of 35.2% last year, the price of olive oil fell to 24.7% in May.
Inflation in May lowest in two years
At 3.2% year-on-year, inflation in May was almost the lowest level in two years. However, the core index (which excludes unprocessed food and energy products) was 6.1%, indicating that price moderation is far from being consolidated. Releasing the data, the INE stressed that the increase in food and non-alcoholic beverage prices was lower than May 2022.