MADRID PRICES CONTINUE TO RISE

UNCLAS MADRID 000114

SIPDIS

DEPARTMENT FOR EUR/EX AND A/OPR/ALS
TREASURY FOR TRACI PHILLIPS

E.O. 12958: N/A
TAGS: ECON AMGT ALOW SP ELTN EFIN
SUBJECT: MADRID PRICES CONTINUE TO RISE


1. SUMMARY. During 2004 there was a general increase in the
cost of living in Madrid and the CPI rose 2.9%. The
transportation and food sectors experienced the highest cost
increases, whereas domestic utilities, property taxes and
leisure activity prices remained relatively stable. Many of
the increases in the cost of living can be attributed to
measures taken by the municipal government. END SUMMARY.


2. In 2004, the cost of living in Madrid rose by 2.9%. Food
prices and transportation costs rose most substantially over
the past year, while domestic utility prices, property taxes
and leisure activity costs increased by amounts close to the
2.9% CPI level.

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FOOD PRODUCTS
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3. Food product prices increased significantly in the past
year. The typical food product in Madrid markets rose 17.35%
during 2004. Despite this figure, prices for certain
products, notably chocolate and beans, have decreased. Fish,
a main component of the Spanish diet, has experienced
particularly high cost increases.

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TRANSPORTATION
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4. One of the largest cost increases in Madrid has occurred
in the transportation sector. Public transportation costs
increased an average of 6% beginning in January 2005. Metro
and city bus ticket prices increased more than 13% while
intercity bus fares increased only marginally (about 2%).
The government has yet to decide when and by how much Renfe
(national rail system) fares will increase. Street parking
will become significantly more expensive in 2005, with meter
fees to increase up to 48%.

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PROPERTY TAX
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5. Property taxes on most residences will increase at the
same rate as the CPI, 2.9%. Larger increases in property tax
will affect the most valuable 10% of property..

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DOMESTIC UTILITIES
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6. Domestic utility costs remained relatively stable, or
even decreased relative to the CPI measure. Electricity
prices rose by 1.71% in 2004 and the cost of water increased
by 2.3% (or one cent per day). The cost of natural gas
remains equal to its cost a year ago. However, a small
increase in gas prices is expected at the end of the quarter.
Fixed line telephone rates will increase by 2%, or about .26
euro per month, beginning in February.

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SPORT, LEISURE AND CULTURE
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7. The cost for most sport, leisure and cultural activities
remained stable throughout 2004. However, beginning in 2005,
the Prado Museum doubled its entrance fees from three to six
euros.


8. Comment. The cost of living in Madrid increased noticeably
in 2004. This trend will most likely continue in 2005 as the
Spanish economy grows. This will be compounded by inflation
rates which tend to grow faster in Spain, and especially
Madrid, than in the rest of Europe. Madrid is quickly
becoming one of Europe,s more expensive cities for
Americans, even without the falling dollar.
MANZANARES