Spain’s inflation rate rose in July to the highest in almost two years as an increase in sales tax came into effect.

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Spain’s inflation rate rose in July to the highest in almost two years as an increase in sales tax came into effect.

Consumer prices based on a European Union measure rose 1.9 percent from a year earlier after a 1.5 percent increase in June, the Madrid-based National Statistics Institute said in a statement today. That is the fastest rate since November 2008. A Bloomberg News survey of 14 economists gave a median forecast of a 1.7 percent increase.

Spain, emerging from an almost two-year recession with the third-largest budget deficit in the euro region, has stepped up austerity measures in a move the government says may undermine the recovery. The main rate of value-added tax was increased to 18 percent from 16 percent on July 1, just as retailers were offering discounts of as much as 70 percent to attract shoppers to seasonal sales.

“Some price increases already happened in May and June but the largest bit will be in July,” said Giada Giani, an economist at Citigroup Global Markets in London. “Without the VAT hike, I’d expect inflation to remain very low.”

Deputy Finance Minister Carlos Ocana forecast in March that about 50 percent of the VAT increase would be passed on to consumers, with companies absorbing the rest. Inditex SA, the owner of Zara, said it wouldn’t pass on the increase.

Spain’s economy came out of the recession in the first quarter, even as unemployment rose to 20 percent. Investors’ concern about a deficit of 11.2 percent of gross domestic product last year led to a surge in Spain’s borrowing costs. The government responded by approving a 5 percent reduction in civil servants’ wages in May and was forced to cut its 2011 growth forecast to 1.3 percent from 1.8 percent as a result of the austerity measures.