Fuels become 32% more expensive in one year and fresh products 23%, which pulls May inflation almost half a point from April
In March, inflation reached its record close to double digits (9.8%), the highest rate in four decades, but in April the situation moderated slightly to 8.3%. A trend that has been broken in May with the CPI rate rising again to 8.7%, as confirmed by the INE on Friday. Inflation in May was four tenths higher than in April, the highest since 1986.
This worsening is due to the fact that the prices of fuel and food have risen again in May, so that despite the lower price of electricity, the inflation rate continues to rise. The INE highlights the variation in core inflation (which does not include fresh food or energy products), since it has risen five tenths from April to May to stand at 4.9%, the highest rate since October 1995.
In fact, this week the average price of gasoline has reached a new all-time high, standing at 2.12 euros/litre on average, while diesel is at 2 euros/litre. Since the subsidy of 20 cents per liter came into force, gasoline has risen 30 cents and diesel, 15.
From the Ministry of Economic Affairs they respond that this rebound is below the maximum recorded in March and that the measures in response to the impact of the war (such as the fuel subsidy) "are clearly limiting the rise in prices." For this reason, they maintain their forecast that inflation will gradually slow down during the second part of the year, although "without ruling out oscillations during the summer months" due to the high uncertainty due to the global economic context. But the forecasts of some organizations such as the
OECD are no longer so optimistic and predict inflation that ends the year at 8.1%.
The core inflation problem
That the shopping basket is what is pulling the IPC is a bigger problem than when energy did it. Core inflation is a more complicated rate to lower than the general rate, which takes into account the price of fuel and electricity, which are more volatile over time. "It is a problem for the Spanish economy because it is a rate that tends to perpetuate itself over time," explains the director of the Funcas Economic Situation, Raymond Torres. This entails a "loss of competitiveness for Spain" and highlights that this is the measure that the ECB looks to adjust its interest rates.
To get an idea of how things have changed, just a year ago core inflation stood at 0.2% (headline CPI at 2.7%). As of June 2021, its rise began gradually, in September it reached 1% and only two months later it had already risen to 2.1%. Last February, when the war in Ukraine began and supply chain problems worsened, this rate was already at 3%, reaching 4.4% in April and standing at 4.9% in May. .
Oil, eggs and bread
It is striking how basic products in the shopping basket such as oil or bread have risen in price. In the first case, the INE has registered an increase in prices of no less than 44.7% since May of last year, while bread has risen 12.6%. Eggs have also experienced a rise of 25.3% and cereals, 16.3%.
Beyond food, what rose the most in May were fuels (32%), heating (32%), personal transport (15.3%), furniture (8.8%) and tourism services and hospitality (6.6%).
In monthly rate, the IPC registered a rebound of 0.8% compared to April, in contrast to the drop of 0.2% experienced the previous month. It is the highest rise in inflation in a month of May since 2018.
For its part, the IPCA, which provides a common measure of inflation to be able to make international comparisons, stood at 8.5% in the annual rate in May, two tenths above that of April.