High inflation is not only due to electricity and gasoline: Spain's core CPI registers the largest gap compared to the EU

Spain's core Consumer Price Index (CPI), which does not include energy or unprocessed food, records the greatest difference compared to the same indicator for the eurozone in the current inflation crisis, intensified since February by the Russian invasion of Ukraine . 5.5% in our country, a record since 1993, compared to 4.6% (always compared to the same month of the previous year).

Almost a percentage point of gap that warns of the greater contagion of price increases to the entire basket of goods and services, beyond electricity, fuel or cereals. And therefore more persistent.

This Friday, Eurostat published the advance of the general CPI of the euro club in June, which has reached an all-time high of 8.6% year-on-year. On Wednesday, the INE did the same, with an advance reading of inflation in Spain of 10.2%. The difference is already worrying at first glance, but it is more so if you look at it in detail.

If energy and unprocessed food (the elements most affected by the disruption of the war in international commodity markets) are not taken into account, the gap between the core CPI of Spain and the eurozone in the harmonized data has grown from being just one tenth in February, to two tenths in March —when general inflation marked a first ceiling in Spain at 9.8%—, half a point in April and May, and up to 9 tenths this last month. And despite the cap on gas and the rest of government measureswhich have been enlarged from this July 1 and until the end of the year.

The INE itself announced on Wednesday that, in June, the inflation peak is justified, in addition to the rise in fuel prices, by the rise in food and non-alcoholic beverages and, after a clear contagion effect, by the prices charged in hotels, cafes and restaurants.

Everything, or almost everything, is much more expensive than a year ago. A reality that is holding back the consumption of families, as seen in the first trimesterand, therefore, economic recovery.

The sharp rise in the price of electricity and fuel has raised production and transport costs and is damaging the purchasing power of households, especially those with lower incomes, and who spend a greater part of their income on basic needs , of which they cannot do without, among which are energy and food.

"We are poorer than before the war," recently acknowledged the governor of the Bank of Spain, Pablo Hernández de Cos, who still sees inflation under control in 2023 - he forecasts an average of 2.8% next year.

The slowdown in the economic recovery is now inevitable, and in Spain, in the short term, whether it is greater or lesser will largely depend on the resilience of tourism demand during the summer. And, of course, the evolution of the war. Especially in the face of autumn, when an escalation of tension could be devastating in the energy field.

This same Friday, the PMI advance indicator of industrial activity in Spain in June remained above 50 points, on which growth points, although it fell again, in a trend that brings it closer to the levels at which it would indicate contraction (below 50 integers).

The S&P Global report that accompanies this index warns that "price increases are affecting demand. High levels of inflation have been a notable feature of the PMI survey for more than a year, and the June survey again revealed a considerable increase in both the costs of inputs [bienes intermedios] as in the selling prices.

"Companies indicated that energy remains a major driver of rising operating costs, although it was again reported that the price of raw materials has generally risen. Inevitably, companies had no choice but to pass on the increase in their costs to customers through higher rates," he adds.

This Thursday in an interview granted to La Sexta, the President of the Government, Pedro Sánchez, warned the Spaniards to prepare for any scenario in the coming months and pointed out that without the economic measures he has adopted, "inflation would be 15 %". In addition, he affirmed that he will continue "articulating measures" to cushion the effects of the war.

Without "hot cloths, the truth must be told to the citizens, [...] because Putin is using gas and oil as another weapon of war," lamented the president.

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