Inflation rose by two-tenths to 5.9 percent in January, according to the final data released this Wednesday by the National Institute of Statistics. The adjustment reflects a higher figure than the estimate published on January 30 by INE. The impact of the VAT reduction in the broad product basket, implemented on January 1, helped contain food price increases, limiting the rise to 15.4 percent after reaching a December high of 15.7 percent. In contrast, fuel and heating products posted a stronger gain, with oil prices up and energy-related costs contributing to the overall uptick. After the removal of the 20-cent per liter fuel bonus at the start of the year, price pressures intensified once again, influencing the January inflation reading.
The loss of the 20-cent per liter fuel bonus and a weaker promotional campaign, along with lower discounts, were the main drivers behind the jump in inflation by two-tenths of a point to 5.9 percent in January. Electricity prices also contributed to the month’s movement. Clothing and footwear prices showed a contrasting trend, falling 11.5 percent from December due to seasonal sales, yet this category remained up by 3.6 percent compared with January 2022 as discount levels were lower. Electric energy prices decreased by 11 percent since December and were 22.5 percent lower than in January 2022.
Final January readings show a softening trend from the peak inflation reached in July, when inflation stood at 10.8 percent. Core inflation, which excludes the most volatile energy and unprocessed food prices, rose by 7.5 percent, signaling ongoing internal price pressures even as some volatile components cooled.
Food price inflation eased from the record December level, moving down to 15.4 percent in January from 15.7 percent in December. The Ministry of Economy notes that the overall fall in food prices in January was driven by the VAT cut that began at the start of the year. Heads of the ministry emphasize that the data reflect lower prices for several staples such as bread, milk, eggs, fresh fruits, legumes, potatoes, flour, and cheese, with the VAT cut from 10 percent to 5 percent on olive oil and pasta contributing to the declines. The VAT reduction on these items helped moderate price increases across the food basket.
At the same time, the government decree that ended the fuel discount at the start of January contributed to higher fuel costs and reinforced inflationary pressures in the energy sector.
Some methodological changes also shape the January inflation figures, including the move toward measuring free electricity and gas market price changes and updating weights in the shopping cart. As a result, the Consumer Price Index calculations for 2023 now assign larger weights to groups such as medicine and education, entertainment and culture, alcoholic beverages and tobacco, transportation, and other goods and services. Conversely, weightings for food and soft drinks, clothing and footwear, housing, and communications have shifted, reflecting recent consumption patterns and policy changes.