Prices soar 9.8% due to the war in Ukraine
Electricity, which has doubled its cost in a year, and gasoline, pull the CPI to a level not seen for four decades
Inflation has been at rates for months that have not been seen for decades, but the data advanced by the INE this Wednesday regarding the month of March has set a new record. The Consumer Price Index (CPI) continues to climb more than two points to 9.8%, which is the highest rate since May 1985, 37 years ago. What rises the most in price compared to a year ago is electricity and fuel, but they are not the only elements that are out of control.
The entire shopping basket rises in price compared to March a year ago, but also compared to last February, when levels were already reached that had not been seen for 36 years. In monthly rate (March over February), inflation rises 3%, its highest monthly rise since 2002, with the impact of the war in Ukraine as a backdrop, which has led to the rise in energy prices and many other products due to lack of raw materials.
This is explained by the Ministry of Economic Affairs, which analyzes that 73% of this increase is due to the impact of the Russian invasion on the prices of energy and unprocessed food. For this reason, they consider it "urgent" to deploy the Shock Plan approved yesterday by the Council of Ministers, which consists of 6,000 million euros in direct aid and tax reductions, and another 10,000 million in ICO credits. The objective is "to be able to reverse this upward trend, curb the increase in costs for companies and families and start reducing inflation to more moderate levels in the short term."
In addition, the core inflation rate (which does not include energy) rose four tenths to stand at 3.4%, the highest since September 2008 despite being six points below the general CPI. For its part, the IPCA, which provides a common measure of inflation to be able to make international comparisons, stood at 9.8% in annual rate, more than two points above that of February.
This is the fifteenth positive rate that chains the CPI, according to advanced data by the INE, which will publish the final ones on April 13.
Bank of Spain: an energy shock
The Bank of Spain had already advanced yesterday that the inflation data that would be known this Wednesday would be "particularly negative." Governor Pablo Hernández de Cos assured that the war in Ukraine is generating an "energy shock" and warned that prices will remain high, although not at current levels, but more than a year ago. Thus, he advocated an income pact between workers and companies, so that some sacrifice part of their purchasing power and others, part of their profits, to contain the rise.
The professor of Economics and Business at the European University, José Manuel Corrales, explains to this newspaper that the measures adopted by the Government in its Shock Plan may have "positive effects in controlling" inflation, although it will largely depend on that the war continues "and the degree of political and institutional consensus" that said plan has. The expert predicts that the average inflation for the year could reach 7%.
Everything indicates that prices will continue their upward trend in the coming months, and the analysts consulted even predict that in a few months they will reach double digits. The CPI only exceeded 10% in 1984, precisely as a result of the serious energy and oil crisis experienced in previous years, which managed to shoot it up to over 15%. At that time, Spain had the peseta as its currency - it would be almost 15 years before the euro came into force - and the Executive chose to devalue it as a measure to contain unstoppable prices.