Inflation rebounded in May to 8.7% with fuel and food soaring

Inflation picked up again in May to 8.7%, according to planned, compared to the same month last year, mainly due to the rise in fuel and food prices. The INE confirmed an increase in the CPI of 4 tenths compared to april (8.3%), while core inflation, which does not include energy or unprocessed food, increased by 4.9% compared to May 2021, a record in 1995.

The OECD forecasts persistent inflation in Spain: 8.1% this year and still at 4.8% in 2023

Know more

The INE (National Institute of Statistics) explains that the rise in the CPI (Consumer Price Index) year-on-year to 8.7% in May is mainly due to increases in fuel prices and of food and non-alcoholic beverages. The latter set a record for 26 years (an 11% increase), highlighting bread and cereals, cheese and eggs, and meat. In the supermarket, the prices of legumes and vegetables fell.

And so did electricity, and without a cap on gas. the so-called Iberian solution to lower the electricity bill by 15% received the endorsement of the Congress of Deputies this Thursday – with the abstentions of PP and Vox and the only votes against Foro Asturias and Nueva Canarias. The Lower House gave its approval a day after the mechanism agreed by Spain and Portugal received approval definitive of the European Commissionwhich has taken longer than expected to approve it, after the clarifications published a few days ago by the Portuguese energy regulator.

However, the rise in fuel prices took the interannual rate of the transport group to 14.9%, more than two points above that registered in April. Some increases that are diluting the discount of 20 cents per liter of gasoline or diesel that the Government has maintained in force since April, and that will continue until the end of June, although it is already being debated whether it will be renewed at the Council of Ministers on June 28.

“We are going to extend the measures as long as necessary and, on the other hand, we are going to see if it is necessary to take complementary measures or adjust them, so that they are as effective as possible and that we can continue cushioning the impact and start a slowdown path as soon as possible. of inflation”, underlined Nadia Calviño, Minister of Economy, this Friday in statements to Galician Television collected by Europa Press.

On the other hand, the restoration, observed in the subgroup of "Hotels, cafes and restaurants", increased its variation five tenths, up to 6.3%. This rate is the highest for this group since August 2001.

“In addition to driving up supermarket prices, global food inflation will fuel core inflationmainly through higher prices in restaurants”, explained Thomas Dvorak, an economist at Oxford Economics, in a recently published report.

"The pressure of demand in the hotel industry after the wave of COVID infections of the omicron variant could reinforce the pass-through of the rise in food prices to core inflation," continues the expert. This threat is aggravated in Spain. On the one hand, due to the great weight of tourism in economic activity. And, on the other hand, but directly related, because it is "the country with the highest expenditure with respect to the total (just over 30%) in food and hospitality"

persistent inflation

The importance of Russia in the global oil and gas market, and also in the market for important raw materials for industry and crucial minerals for the ecological transition, intensified the rise in prices since before the invasion of Ukraine began. In addition, regarding basic foods, before the war, together, both countries produced 25% of the wheat that was traded in the world and 15% of the corn. In both cases, prices have skyrocketed in recent months.

The bad data for May, after 7.6% in February, the peak of 9.8% in March, and 8.3% in April, and the acceleration of the core CPI justify that the Organization for Economic Co-operation and Development (OECD) foresee persistent inflation in Spain “due to the impact of the Russian invasion of Ukraine”. The agency estimates that prices rise 8.1% this year on average and even continue to increase by 4.8% in 2023according to the updated outlook report released on Wednesday.

It is one of the institutions that launch the most alert about price increases. Their expectations would indicate that companies will continue to transfer the increase in costs (due to the rise in energy and essential raw materials for industry or food) to sales prices, which represents a significant loss of purchasing power for families if wages do not increase.

To better understand the risk of persistent inflation, which finds sustenance in food and without a rise in wages to offset it (that already asks even the ECB), it serves as a practical case. The 7.5% average CPI that estimates the Bank of Spain for this 2022 It means losing a salary payment compared to last year. In concrete figures, if a worker's annual gross salary of 20,000 euros, who receives 1,429 euros in each of the usual 14 payments, the rise in prices gives that 7.5% bite, the cut in income is about 1,500 euros. That is, he effectively loses a payment, which does not mean the same for low-income families than for others with more, or with many more.

Source link