In the Canary Islands, residents may hardly feel the dip in the annual Consumer Price Index last month, even though this autonomous community remains the only one where every price category declined. The mild impact on household budgets comes from a CPI uptick slowing to three-tenths, moving from 3.9% in June to 3.6% in July, according to yesterday’s data from the National Institute of Statistics. The monthly price change was only 0.1% lower, aided by a sharp 13.2% drop in clothing and footwear in July (Source: INE).
Excluding core inflation, energy products, and unprocessed food prices, the Canary Islands held steady at 6.2% last month. This contrasts with the national trend, where the rate rose from 5.9% to 6.2% after two months of decline (Source: INE).
Although the overall June-to-July price decrease is barely noticeable, the Canaries experienced a more pronounced rise in food costs, up 0.7% in July. Shopping basket prices remain the highest in the country for a second consecutive month, with entertainment and culture climbing 2.2% and hotels, cafeterias, and restaurants up 0.7% last month (Source: INE).
The July CPI decline in the archipelago should not be dismissed, especially when viewed against the past year. CPI grew 3.6% in the Canary Islands compared with July 2022. The archipelago, despite bearing the steepest price pressures, followed the national trajectory of price increases among all autonomous communities, surpassed only by Ceuta (4.3%) and Melilla (4.1%) (Source: INE).
Across the board, costs remain higher than twelve months ago in the Canary Islands. Food prices rose by 13.1%, followed by hotels, cafes and restaurants at 7.7%, alcoholic beverages and tobacco at 6.5%, and entertainment and culture at 5.4% (Source: INE).
The shopping basket that worried the Islands the most rose 13.1%, placing the Canaries well above the national average of 9.7% and marking twelve consecutive months where CPI was highest in Spain for residents stocking up on home furnishings, essential products, and soft drinks (Source: INE).
Alcohol and tobacco prices fell by only 0.1% in July, yet these items remain 6.5% more expensive over the past year. The Canary Islands are among the regions with the smallest price increases, alongside Galicia (6.5%) and Asturias (6.4%) (Source: INE).
Visiting hotels, buying sandwiches at cafeterias, or dining out in July was 0.7% more expensive. While such activities fluctuated in recent months, the long-term trend is upward, with prices in these sectors rising 7.7% over the past year (Source: INE).
Other price increases occurred in entertainment and culture. In July, frequent movie-ticket purchases for Barbie and Oppenheimer translated into a 2.2% monthly rise for Canarians, following a 5.4% surge in June—the strongest monthly increase in the last year (Source: INE).
As for price declines, apparel and footwear led the way with a 13.2% drop in the Canary Islands, compared with a countrywide average decrease of 9.7%. These sales primarily drove the July CPI decline in the archipelago (Source: INE).
House prices did not drop but inched down by 0.1% in July. On an annual basis, housing costs in the archipelago have fallen by 11.2% versus 2022 (Source: INE).
The price of transportation for personal use fell 0.2% in July, reducing private mobility costs by 3.1% over the last year. At the national level, such expenditures rose by 0.6% (Source: INE).
CEOE refuses to meet ECB’s inflation target for Islands
Following the CPI release, the Tenerife Confederation of Employers (CEOE) stated that despite the July dip, prices are likely to rise again due to higher wages and fuel costs. The group argues that inflation targets may not be reached (Source: INE).
Pedro Alfonso, head of Tenerife’s employers association, noted that the Canary Islands continue to trend downward even as the national CPI climbs. The national rate rose from 1.9% in June to 2.3%, while the Canary Islands moved from 3.9% to 3.6% (Source: INE).
Alfonso attributes the island’s CPI decline to lower energy prices, cheaper raw materials, and fewer bottlenecks in industry last year, suggesting energy price volatility in 2022 skewed the broader exchange rate. He advocates focusing on the base ratio, which is expected to converge anyway (Source: INE).
The CEOE emphasizes continuing to monitor the economy with attention to daily developments and medium-term forecasts, as the tourism-dependent island economy faces ongoing uncertainty. If this trend persists, the archipelago could encounter some challenges with next season’s tourist bookings (Source: INE).