The contributory pensions enjoyed by more than nine million people in Spain will rise by 3.8% in 2024, with which the maintenance of the purchasing power of this group is guaranteed. The increase is not much of a surprise because it is the result of the law that, from the end of 2021, establishes an automatic revision mechanism based on the average of the interannual CPI between December of the previous year and November of the current. We need to know the last data to launch the accounts.
The INE published it yesterday: the CPI stood at 3.2% in year-on-year terms in November, three tenths less than the month before. The percentage is preliminary and is pending confirmation in mid-December, but it does not usually fail, therefore, the same Ministry of Social Security gave it as valid yesterday and announced the increase in pensions, which will be added to the 8, 5% applied in 2023.
The law that endorses this review is 21/2021, of December of that year. It put an end to the previous method, detached from the CPI and with a high margin of political discretion, in which increases, of a smaller proportion, were often compensated with some subsequent payment.
Year-on-year inflation was contained in November thanks to electricity, fuel and food. The data is positive because a larger percentage was expected. Prices had started the year with rises of nearly 6%, but moderated to 1.9% in June, at which point they rebounded to be above of 3%.
The new Minister of Inclusion, Social Security and Migration, Elma Saiz, indicated yesterday that the average increase in pensions will be 640 euros per year. It is “extremely important” to guarantee the purchasing power of pensioners and this revaluation gives them “security and certainty”, he stated in the Congress of Deputies, after the start of the XV legislature.
The pensions that are revalued also include those for permanent disability, widowhood and orphanhood. The minimum and non-contributory ones, which are linked to the poverty threshold and the survey of living conditions, and on which the central government has not yet taken a decision, remain to be reviewed.
The Ministry of Social Security calculates that 73% of contributory pensions are for retirement and that the number of benefits of this type is growing at an annual rate of 1.3%. Its cost is equivalent to 11.5% of GDP.
The drop in inflation in November responds, as the INE explained yesterday, “to the drops in the prices of fuel and tourist packages, greater than those recorded in the same month of 2022”. In addition, food prices are rising less than a year ago, while electricity continues to become cheaper, although now at a slower rate.
Another positive element is that, in monthly terms, that is, in the comparison of November against October, prices have fallen by 0.4%, which is the first decline since January.
The First Vice-President and Minister of Economy, Trade and Enterprise, Nadia Calviño, described the data known yesterday as “very good news”. The containment of prices, he said, means that “wages continue to gain purchasing power, and Spanish companies, competitiveness”.
Core inflation, which excludes energy and fresh food, also fell in November, in this case seven tens, to stand at 4.5%.
According to Funcas’ Economic Conjuncture director, Raymond Torres, the November inflation data “shows that disinflation is firming up”. The main unknown now is, according to him, the withdrawal of the Government’s measures to combat inflation, the reversal of which would add 1.5 points to the CPI. However, “it seems that only the cuts in VAT on energy and excise duties on this product will be reversed, which could add between seven and eight tenths to the CPI”.
Manuel Hidalgo, senior fellow of EsadeEcPol and professor at Pablo de Olavide University, described yesterday’s data as “very good”. “Our estimates are that food has grown very little”, he indicated. According to Oxford Economics’ Europe Economics manager, Àngel Talavera, the cut in underlying inflation is particularly positive.
