Prices stabilize in August and inflation remains at 2.7%.

BarcelonaPrices remained stable in Spain in August, according to the Consumer Price Index (CPI) data released by the National Statistics Institute (INE) this Friday. Thus, the change compared to July was 0%, while in annual data, the CPI grew 2.7% compared to August of last year, the same percentage as in July. The stability of the year-on-year CPI in the eighth month of the year curbs the rise in inflation experienced in the previous two months.

Regarding price trends during the month of August, the smaller drop in fuel prices compared to August of last year prevented a smaller decline in the CPI. In contrast, food prices performed better than twelve months ago, with a larger drop in prices, while electricity, which did rise, did so less sharply than a year ago.

The core inflation rate—which excludes more volatile items such as energy and food—rose one-tenth of a percentage point to 2.4%. Thus, although price trends remain below the February highs of 3.1% in Catalonia and 3% in Spain, they are still above the European Central Bank's target of inflation at around 2%.

"Price stability and wage increases are allowing families to gradually recover their purchasing power," the Ministry of Economy, Trade and Business emphasized in its assessment of the advance CPI data for August. The INE (National Institute of Statistics and Census) is scheduled to release the final CPI data for August on September 12th. This will also include data on price trends by region and the trends in the various sectors and subsectors that make up the shopping basket.

Loss of competitiveness

But not everyone views price developments with the same optimism as the Spanish government. The College of Economists of Catalonia, following data published this Friday, has warned of a loss of competitiveness in the Spanish economy. According to the organization, the Spanish economy continues to lose competitiveness despite the stagnation in inflation recorded this August, which is not enough to reach the levels seen on average in the EU.

For the College of Economists, inflation of 2.7% is far from the EU average and the target set by the European Central Bank (ECB), both at 2%. Regarding core inflation, the College has highlighted that the annual rate for August was 2.4%, one-tenth higher than the previous month and in line with the upward trend that began this June. The College of Economists has placed particular emphasis on the fall in fuel prices in August, which was lower than that recorded in the same month last year. "It would be pertinent to further analyze the factors and aspects that explain the differential behavior of Spanish inflation compared to the EU level," asserted the institution's dean, Carlos Puig de Travy.

The CPI data also fails to satisfy unions, especially given the upward trend in underlying inflation. This Friday, the UGT warned of the "moderately upward" trend in underlying inflation, which in August stood at 2.4% year-on-year, the highest level since last April. "The rise in inflation in recent months has pushed it further away from the 2% target set by the European Central Bank, with an underlying rate that, eliminating the most volatile elements, shows a moderately upward trend. Added to this context is the possible negative impact of the tariffs imposed by Trump and the persistence of tensions.

All in all, the organization headed by Pepe Álvarez emphasizes that the data from the Business Margins Observatory continue to show an "exceptionally beneficial" situation for the Spanish business community, which in the first half of the year achieved the second-best margin figure since the start of the series (2009). pressure on prices and continue to increase wages.

In this sense, the average wage increase agreed in the collective bargaining agreement stood at 3.46%, above the average inflation so far this year. However, the union warns that purchasing power is not being gained to the same extent, existing wages." "Home purchase prices have already surpassed the 2008 bubble levels in several autonomous communities, while rent, in addition to the scarce supply, accounts for more than 100% of net wages in some sectors and cities," the union argues. The high cost of housing, along with business margin data, is being considered in the context of collective bargaining, so that it can serve as an impetus to consolidate wage increases that are better aligned with the real cost of living and the current economic situation.