2022 closes with inflation easing to 5.8 percent, one point lower than the prior month according to the December Consumer Price Index. The shift is largely tied to energy prices, while the core rate rose to 6.9 percent from 6.3 percent in November, driven mainly by a higher grocery bill.
Spain’s head of government, Pedro Sánchez, announced that the annual inflation rate sits at its lowest in the euro area and within the European Union. In this context, he outlined a framework for a new crisis relief package to be considered by Congress in an extraordinary January plenary session. Measures under discussion include removing VAT on bread, milk, eggs, fruit, vegetables, legumes, and grains, and cutting VAT on oil and pasta from 10 percent to 5 percent.
Basic foods will be sold without VAT for 6 months, oil and pasta will be reduced to 5 percent
These measures are slated to stay in place until 30 June or until the annual base inflation rate, excluding energy and unprocessed food prices, falls below 5.5 percent. This indicator peaked at 6.4 percent in August and has remained in that vicinity since. The overall CPI reached a high of 10.8 percent last July, matching a level not seen in four decades.
The inflation pattern shows an initial lift in the general price level driven by energy costs. A second stage then saw the rise spill into the broader economy, reflected in the uptick of core inflation. Food prices stood out, climbing by more than 15 percent through November. December figures will be released in mid-January with the final CPI, but indicators point to a continued upward tendency.
The Consumers and Users Organization, OCUs, has monitored price movements since late November. It found that the Christmas shopping basket was about 8.2 percent more expensive in the week compared with the previous month. Fish and shellfish, popular during festive meals and not covered by VAT reductions this year, along with meat, saw no relief under the proposed measures.
Food price trends are a primary driver behind government action. VAT relief is projected to cost around 661 million euros. A separate measure offers a single 200 euro payment for households earning under 27 000 euros per year and possessing assets below 75 000 euros. This initiative is expected to be more effective than the previous 200 euro payment, which reached only a quarter of the intended families.
The government’s inflation mitigation plan totals about 10 billion euros, with Sánchez noting it will be added to the 35 billion euros already allocated to soften the impact of the Ukraine conflict.
The evolution of the general price level intersects with social protections. Retirement contributions are set to see an 8.5 percent increase next year following the established CPI pattern from the last 12 months (November 2022 to December 2021). In the same week, the cabinet approved the royal decree enabling pension revaluations, a 15 percent rise for non-contributory pensions, and the extension of the minimum living income program.