The annual increase in Spain's Consumer Price Index (CPI) rose to 3.5 percent in September, according to the preliminary data released by the country's official statistics office.

The inflation indicator surged from 2.7% in August and 2.2% in July as the impact from the country's sales tax hikes has been felt in the last month. Since the high of 3.8% reached in April of 2011, prices had been slowing down gradually.

The preliminary harmonised CPI also rose by eight decimal points from 2.7% to 3.5%.

Opinion

We will have to wait another two weeks for the final CPI reading and all of its details. However, it is clear that the sales tax increase announced by the government is mostly responsible for the increase.

As feared, the higher sales tax which went into effect in September has triggered prices to rise more than 3% and above the Eurozone's average. The preliminary Eurozone's harmonised CPI rose by one decimal point to 2.7% instead of the decline that had been expected.

Spanish citizens are seeing how their purchasing power is diminishing. The Spanish economy is losing price competitiveness against other economies.

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