`Bank of Spain Attributes Ongoing Inflation to Soaring Olive Oil Prices - Olive Oil Times
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Bank of Spain Attributes Ongoing Inflation to Soaring Olive Oil Prices

By Daniel Dawson
Jun. 25, 2024 12:45 UTC

Officials at the Bank of Spain said high olive oil prices are one rea­son infla­tion, espe­cially food infla­tion, remains more ele­vated in Spain than else­where in Europe.

According to data pub­lished by the bank, Spain’s con­sumer price index – a weighted aver­age of the price of con­sumer goods and ser­vices pur­chased by house­holds – increased to 3.8 per­cent on an annu­al­ized basis in May.

We are con­sum­ing more of the foods that are increas­ing the most (in price), and we can sin­gle out one: olive oil.- Ángel Gavilán, econ­omy direc­tor, Bank of Spain

Along with Portugal, Spain has the fifth-high­est infla­tion rate in the European Union and third-high­est among coun­tries that use the Euro. The con­sumer price index in the 27-mem­ber bloc ticked up to 2.6 per­cent in May.

Food infla­tion is par­tic­u­larly high, ris­ing slightly to 4.6 per­cent com­pared with last year, sig­nif­i­cantly above the European Union aver­age of 1.6 per­cent. Bank of Spain econ­o­mists con­tend that ris­ing olive oil prices at retail are pri­mar­ily respon­si­ble.

See Also:Record Olive Oil Prices Drive Food Inflation in Greece

“We are con­sum­ing more of the foods that are increas­ing the most [in price], and we can sin­gle out one: olive oil,” Ángel Gavilán, the Bank of Spain’s direc­tor of econ­omy and sta­tis­tics, said dur­ing a pre­sen­ta­tion on the organization’s macro­eco­nomic fore­cast.

“Not only do we con­sume more than in Europe, but it is one of the goods that has increased the most and explains half of the dif­fer­en­tial,” he added.

According to Spain’s Organization of Consumers and Users (OCU), a non-profit con­sumer price watch­dog, olive oil prices rose between seven and 23 per­cent at the country’s most pop­u­lar super­mar­kets between December 2023 and April 2024.

Data from NielsenIQ, a mar­ket research firm, show that olive oil prices at retail rose by about 62 per­cent from May 2023 to May 2024.

“For the first quar­ter of 2024, experts were talk­ing about a con­tin­u­a­tion of the increases, and the fore­cast has been ful­filled,” the OCU wrote. ​“For the sec­ond half of 2024, they announce the main­te­nance of prices until June and then, if it rains (which has hap­pened), a price drop.”

Data from Infaoliva show that olive oil prices at ori­gin are €7.485 per kilo­gram, a 23 per­cent increase from June 2023.

To help ease the bur­den of Spain’s above-aver­age food infla­tion, the gov­ern­ment announced plans to extend the elim­i­na­tion of Value-Added Tax (VAT), which is sim­i­lar to sales tax.

The cur­rent exemp­tion, enacted at the begin­ning of 2023, elim­i­nated VAT on sta­ples, includ­ing bread, flour, milk, cheese, eggs, fruits, veg­eta­bles, legumes, tubers and cere­als. Olive oil and pasta were added to the list at the begin­ning of 2024.

Before being included in the list of sta­ples, VAT on olive oil was reduced from ten per­cent to five per­cent in 2023, which con­sumer advo­cates accu­rately pre­dicted would be insuf­fi­cient to curb ris­ing prices.

Spain’s Congress of Deputies must approve the exten­sion of the mea­sures so that they remain in force. The Independent Authority for Fiscal Responsibility has found that In the 18 months since they were enacted, the VAT elim­i­na­tion and reduc­tions have cost the gov­ern­ment more than €1 bil­lion.

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