Shoppers still feel the squeeze at the register even after tax cuts. The 0.2% rise in food prices in Alicante province carried into January, tempering hopes that a Value Added Tax reduction on basic groceries would ease everyday costs. Supermarkets point to higher sourcing costs, while consumer groups warn that some links in the distribution chain keep squeezing margins. This price uptick sits beside relief in other sectors, with energy, clothing, and footwear showing declines that slightly pulled inflation downward.
Many hoped for VAT relief on staples such as eggs, dairy, and fruit, all of which have enjoyed exemptions since January 1. Oils and pasta also moved from 10% to 5% on the same date. Yet data from the National Institute of Statistics shows prices in households’ shopping baskets kept climbing that month, recording a 16.1% annual rise for the province in 2024.
What is driving higher food costs? Pedro Reig, director of the Association of Supermarkets of the Community of Valencia, notes that most products that benefited from the VAT cut actually lowered their prices. He points to fruit at 4.2%, flour at 2.3%, milk and eggs at 1.5%, potatoes at 1%, cheese at 0.7%, and bread at 0.2% as examples. He calls for deeper investigation into why these savings did not translate into stronger relief on the shelf, suggesting wholesale price pressures have persisted. The trend has continued over the past year and into the current year.
Reig adds that wholesale cost increases also affect products beyond the VAT relief and influence the overall consumer price index. He emphasizes that only a fraction of supermarket items receive tax breaks—roughly 1,000 of nearly 8,000 references—highlighting the broad reach of price dynamics beyond the VAT changes.
Cecilio Nieto, president of Alicante Consumers Union, expressed disappointment and challenged the prevailing view. He argued that food prices might have risen even more without the VAT reduction, while market manipulation at the distribution level remains a concern. Nieto called for stronger supervision to protect families facing financial stress rather than accepting a temporary patch in pricing.
Despite some relief from VAT reductions in food, inflation rose to 5.9% in January
January’s consumer price index shows notable shifts: non-alcoholic beverages up 2.8% and alcoholic beverages up 3.2% when food is excluded. Electricity, gas, and other fuels fell sharply by 13.1%. Clothing prices surged by 15.3%, while footwear rose 5.6%. The tourism sector also shows a 13.5% drop in holiday packages, reflecting mixed movements in the price landscape. Overall inflation remained above 6% year over year, signaling slower month-to-month changes but persistent annual pressure.
The broader national pattern mirrors the Valencian Community, with food prices edging higher month over month while total inflation stays elevated. In the Valencian Community, shopping cart prices rose in line with national trends, yet the CPI declined by 0.3% in the same period, underscoring regional nuances in price dynamics and consumer costs.