The escalation of fuels, in a big way, and of electricity have caused a spike in inflation of nine tenths in September compared to the month of August. The CPI stands at a 3.5% annual rate of variation, according to the advanced data published yesterday by the National Institute of Statistics (INE). Prices haven’t grown this much in a month since June 2022.
The provisional figure is, however, far from the peak levels of the summer of 2022, when the CPI reached a double-digit rise, but implies an increase in consumer prices for the third consecutive month after the floor of the 1.9% recorded in June. The monthly rate has only been negative this year in January.
The increase in the price of a barrel of oil explains this rise in inflation and anticipates a final quarter with rising rates, explained Raymond Torres, director of the situation at Funcas. “From now until the end of the year the CPI could touch 5% and then stabilize and go down little by little”. This pessimistic forecast was shared by Miguel Cardoso, chief economist for Spain at BBVA Research: “Inflation could end 2023 close to 4.5%”, which will add more pressure to public finances. The CPI figure at the end of the year is taken as a reference for the revaluation of pensions (the one for November, in particular) and for future salary negotiations.
Oriol Aspachs, director of the Spanish economy at CaixaBank Research, described the rise in the price of oil as “the main risk” for inflation in the medium term. “It is difficult to predict how it will evolve”, he added.
The upward trajectory of inflation has also been influenced by the increase in electricity prices. Electricity and fuels recorded a moderation in September 2022, so the so-called “base effect”, the comparison with the same month last year, was decisive in the early registration of this September.
Core inflation, which does not take into account energy or fresh food, moderates growth and remains at 5.8% in September, three tenths less than last month. This figure, which offers a more fundamental trend on the behavior of prices, is far from the peak of the first quarter when, in February, it reached 7.6%.
According to Raymond Torres, of Funcas, the moderation in underlying inflation growth is due to the behavior of the services sector, in which costs have been cut, compared to previous months, and there has been “a cooling of demand as a result, mainly, of the rise in interest rates”. In this sense, the upward evolution of oil “will not break a decline in the underlying” during the coming months, added Torres. For Aspachs, from CaixaBank Research, “the good news” for September is this underlying CPI, which “reflects that inflationary pressures are coming to an end”.
The Ministry of Economic Affairs assessed yesterday that the underlying inflation is, pending the confirmed data, “at the lowest rate since June of last year”. Regarding the general CPI, and despite the rise of nine tenths, Economia emphasized that Spain is “among the countries with the lowest inflation and the highest growth in the euro zone”. Inflation in Germany in September stood at 4.5%.
The great doubt about economic policy is currently centered on knowing what the Government will decide on the anti-inflation aid package, which is in force until December 31. “An immediate dismantling would produce a one-time increase in prices, especially if the reductions in electricity or gas taxes are removed”, warned the director of the situation at Funcas. Despite this, the three experts consulted are in favor of maintaining aid to the most disadvantaged groups and to transport professionals. In other words, they aim to target them in line with the recommendations of international bodies.
Miguel Cardoso, chief economist of BBVA Research, pointed out that the Executive must not lose sight of the fact that “on the horizon is the process of fiscal consolidation” of the Community.
With regard to the evolution of prices over the next few months, the Bank of Spain reviewed last week the inflation forecast for 2023 and estimated that the year will close with a rise of 3.6% on average, four tenths more than expected so far. The president of the Fiscal Authority (Airef), Cristina Herrero, warned, for her part, of a slowdown in the growth of the Spanish economy more intensively and earlier than the body expected.
