The CPI chains three months above 10% and grips the consumption of families

Neither the drop of around 10% experienced by the price of fuels during the month of August, nor the cap on the price of gas, nor the millionaire relief measures decreed by the Government are being able to dismount the CPI from the levels above the 10% that it climbed last June and has not abandoned since then. The main indicator of price inflation in the economy stood at 10.4% in August, compared to the rate of 10.8% registered in July, according to the advance data released yesterday by the National Institute of Statistics (INE). ). In this way, the CPI is chaining its third consecutive month above the psychological bar of 10%, which links the current inflationary episode with the price tensions experienced in the oil crisis of the seventies or in the economic reconversion of the mid-1970s. eighty, and what increases the burden that domestic economies have to bear in the shopping cart. MORE INFORMATION Spanish households anticipate the recession: they cut costs and change their habits The price of electricity closes August as the most expensive month in history «We have already entered a vicious circle. The indicators are beginning to show an upturn in savings, anticipating a worsening of the economic situation, and a withdrawal of consumption due to inflation. Bearing in mind that domestic demand accounts for 60% of GDP, this will translate into less economic activity. In the end, it is likely that it will be the economic recession that ends inflation, ”says Antonio Pedraza, president of the Financial Commission of the General Council of Economists (CGE). Short-term expectations are far from encouraging. Although the general price index slowed down from 10.8% to 10.4% in August, the core CPI –which eliminates the most volatile elements of inflation and reflects the evolution of the hard core of the price basket– continued to rise to 6.4%. Desktop code Image for mobile, amp and app Mobile code AMP code 1120 APP code The first vice-president of the Government, Nadia Calviño, has framed this Tuesday this evolution of subjacent inflation within normality. Of the relative normality of a context in which the CPI is above 10% due to the rise in energy prices and in which these influence the prices of the rest of the items in the shopping basket. Even so, Calvino wanted to guess in the advance data for August - just as he did in April when the CPI fell from 9.8% to 8.3% - the beginning of a downward path, which he attributed to the measures approved by the Government, which in a few months will return the CPI to more reasonable environments. One more year of high prices Analysts do not share this opinion. "The evolution of core inflation is worrying because, contrary to what happens with the general CPI, there is no turning point," says Miguel Cardoso, chief economist for Spain at BBVA Research. «The prices of some services, which for two years have contributed to moderating inflation, are now influencing upwards and that is going to be an obstacle to the downward bending of the underlying rate. We may see core inflation levels of between 5% and 7% for at least a year," he concludes. The scenario predicts months of tension in the salary negotiations. The subjacent rate of inflation, which a few months ago – when it was around 3% – was seen as a reasonable reference to fix salary increases that would protect the purchasing power of workers, now threatens to converge with the general index and put the negotiators of company in a brete. "An income agreement is increasingly essential," says Antonio Pedraza, from the College of Economists, "but we must realize that agreeing to wage increases above 4% or 5% would be very detrimental to a business fabric that is made up mostly of SMEs and micro-enterprises. “What we are seeing now is the materialization of the indirect effects of the increase in energy prices in other sectors such as textiles or other service activities, which are beginning to transfer the increases in their costs to prices and thus raising inflation. underlying”, explains Javier Ibáñez, economist at CaixaBank Research. "The income pact is relevant to try to avoid second-round effects, whose impact on inflation would be much more persistent," he warns. The economic vice president of the Government insisted again on Tuesday on the need to moderate both wages and business margins to avoid second-round effects on inflation. The person in charge of the Financial Commission of the Association of Economists understands that this income agreement should also involve the Administration and should bring a tax reduction. “Ideally, the income agreement would be accompanied by a reduction in taxes and social contributions for workers and companies, which not only suffer from the rise in prices but also the additional tax burden that this entails,” he stresses. Analysts' views regarding the future behavior of inflation seem to converge in the expectation that the general CPI will moderate towards rates of 8% between now and the end of the year, while core inflation will remain at levels very similar to the current ones. . Looking ahead to next year, a gradual and gentle moderation is expected, which would leave the average CPI for 2023 at around 5% and the underlying one at 4%. Everything is uncertainty All these figures, the closest and the furthest, are surrounded by very important levels of uncertainty. The analysts consulted agree that the short- and medium-term evolution of inflation will largely depend on the decisions adopted by the European Commission on the energy market, which could alleviate the tension on energy prices, on the possible supply cuts that Russia may decide and also of the magnitude and persistence of the economic recession that is announced for countries such as Germany and that could also affect the Spanish economy, albeit slightly. In his inflation forecast for the remainder of 2022 and 2023, formulated last June, Funcas advanced that in a context of rising prices for a barrel of oil above 100 dollars, the average CPI for the year could go up up to 9.4%, while in a possible scenario in which oil prices fall to 90 dollars, average inflation would remain at 8% compared to a central scenario of average inflation of 8.9% in 2022.

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