The CPI falls to 8.4% but the hard core of the shopping basket becomes more expensive than ever in the era of the euro

bruno perez
Updated: 04/28/2022 10:06 a.m.
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After an uninterrupted climb of thirteen months, in which the CPI -the statistical indicator that measures the evolution of prices in Spain- went from zero growth to a rise of 9.8%, unparalleled in the last 40 years, the INE has reported this Thursday a slight moderation in the evolution of the indicator, which according to the advanced data would now show a growth of 8.4% compared to the price level existing a year ago in Spain.

The news is half good. On the one hand, it conveys the impression that after the March turbulence in the energy markets -determined by the conflict in Ukraine-, in which the rise in oil and gas prices sent prices skyrocketing like never before since records began, the Inflation would have peaked and will not finally exceed the 10% barrier. On the other hand, the data advanced by the INE shows a very accelerated evolution of core inflation, the indicator that eliminates the effect of the most volatile components of the CPI (energy and fresh food) and that analysts and those responsible for public policies take as a reference to determine the true magnitude of the inflation problem.

According to the data advanced by the INE, this index shot up one point in April to 4.4%, reaching its highest level since 1995. The hard core of prices had never reached such a high level since Spain it is part of the Europe of the euro and our monetary policy is related to that of Germany, France or Italy.

The evolution of core inflation tells several things. The first and most disturbing is that energy price tensions have already filtered significantly to all corners of the economy and have reached the prices that companies pass on to consumers. The second is that with underlying inflation at these levels, it is more likely that the ECB will decide to raise interest rates sooner than expected, something that is not good news for Spain with a very high level of debt. And the third is that, a few days before May Day, wage negotiations in collective agreements are heading towards a situation of significant tension. The agreements signed to date present an average salary increase of just over 2%, which until now was more or less close to the level of the underlying CPI, but with this indicator at 4.4%, the reference for salary increases is It is already moving to levels that can be burdensome for companies.

According to Statistics, the reduction in the interannual CPI to 8.4% is due, mainly, to the decreases in the prices of
electricity
and fuels. On the other hand, food prices registered a greater rebound in April than in the same month of 2021.

Prices fall 0.1% in the month

In monthly rate, the CPI registered a decrease of 0.1% in April compared to March, its first fall after two months of increases. In the fourth month of 2022, the Harmonized Consumer Price Index (IPCA) placed its interannual rate at 8.3%, one and a half points below that of March.

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