Spain's Consumer Price Index (CPI) rose by 0.6 per cent monthly and 2.7 per cent on an annual basis, the country's national statistics office revealed on Wednesday. The change for the previous month was -0.2 per cent and 2.2 per cent, respectively.

Core CPI, which excludes the more volatile food and energy products, rose 1.4% on an annual basis compared to 1.1% in April and May.

Harmonized CPI rose from 2.2% to 2.7%, surpassing the European Union's (EU) 2.6% according to Eurostat, the official EU statistics office.

The more inflationary items in Spain were alcoholic beverages & tobacco (9.9%), medicine (6.4%), transportation (6.1%), and housing (6.0%). The least inflationary were communications (-4.6%), recreation & culture (-0.2%), clothing & footwear (0.0%), and furniture & household equipment (0.4%). So far this year, clothing and footwear prices have fallen by -15.7% as retailers aggressively lower prices in order to boost demand.

According to analysts at Digital Look, "the inflation outlook for the upcoming months is reaching dangerous levels. Energy prices have risen as the Spanish government's VAT tax increases become effective in September. It is possible that price growth may rise above 3% and surge above the European Union average. Prices had been slowing down from the 3.8% high reached in April of 2011.

"Spaniards are seeing their purchasing power diminish. Higher inflation in Spain than in the rest of the region will erode away the Spanish economy's price competitiveness," they said.

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