Inflation moderates four tenths, to 10.4%, in August due to the reduction in fuel

Inflation is moderating in Spain, although it is still installed in two digits and at levels not seen for more than three decades. The advance CPI data stood at a rate of 10.4%, four tenths less than in July, thanks to the reduction in fuels and the rise in electricity prices and the shopping cart. Despite this cut, the Statistics data suggest that inflation is entrenched in our country: the underlying rate (without fresh food or energy products) rose three tenths, to 6.4%, due to the rise in food and the leakage of energy prices to other items, a phenomenon derived from the effects of the second round. If confirmed, it would be the highest level of core inflation since January 1993.

Statistics explains that this evolution is mainly due to the reduction in fuel prices, which rose in August 2021, and, to a lesser extent, to the decrease in liquid fuels, greater than that registered the previous year. On the contrary, he highlighted the increase in the prices of electricity, food, restaurants, hotels and tourist packages.

"We are already on a downward path," predicted the Minister of Economy, Nadia Calviño, in an interview on TVE and after knowing the advance CPI data for August. Despite the optimism shown, Calviño called for "prudence" because "the uncertainty is very high as a result of the war" in Ukraine.

This inflation, initially concentrated in electricity and fuels, spread to all sectors of activity, especially food, with serious consequences for the purchasing power of households.

According to the Spanish government, inflation is expected to fall slightly in the second half of the year, although it will remain high, with an average level of 7.8% forecast for 2022.

With this drop of four tenths, the indicator puts an end to three consecutive months of increases in its interannual rate: in May it rose to 8.7%; in June it exceeded two digits (10.2%) and in July it rose to 10.8%. August is, however, the third consecutive month in which inflation exceeds double figures.

In the eighth month of 2022, the Harmonized Consumer Price Index (IPCA) placed its interannual rate at 10.3%, four tenths lower than that registered in the previous month. For its part, the estimated monthly variation of the IPCA registers an increase of one tenth. The INE will release the final CPI data for August on September 13.

Energy crisis

The respite in August could be temporary if a solution to the upward trend in electricity prices is not found. The electricity item has shot up again since mid-August due to the rise in gas prices. The worsening of the energy crisis is due to Gazprom's announcement that it will cut gas supplies to Germany from August 31 for three days. In fact, the average price of electricity in the wholesale market rose 8.51% today, Tuesday, to 459.4 euros per megawatt hour (MWh), a figure that represents the third maximum in the historical series.

In Germany, electricity futures for 2023 registered a record yesterday Monday by exceeding 1,000 euros per megawatt-hour (MWh) for the first time. This figure means doubling its price in just two weeks as a result of the energy pumping crisis in the region.

Meanwhile, in the eurozone, prices are also rising unchecked due to factors such as energy, the shopping basket and tourist services. The community statistics office pointed out in mid-August that the item that most drove the increase in prices in the euro zone in July was energy, which rose 4.02 percentage points, although it was slightly below the increase of 4 .19 points in June. Electricity, gas or fuels were followed by food, alcohol and tobacco (2.08 points), services (1.6 points) and the rest of industrial goods (1.16 points), with increases compared to June in all those categories.

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