Everything indicates that the worst has already passed in terms of inflation, which does not prevent us from still having to suffer from high levels of prices for the rest of the year. Down, yes; but with considerable rates. Yesterday’s May CPI data confirmed the trend that had already been pointed out in the previous two months. Prices moderated nine tenths, until they stood at 3.2%, which is the lowest rate in almost two years, since July 2021. The figure confirms the advanced inflation data that the ‘ National Institute of Statistics (INE) facilitated on May 30.
The moderation of year-on-year inflation to 3.2% is largely due to the fall in the price of electricity and also to the moderation of food prices. Food products, so sensitive because they particularly affect the pocket of the most vulnerable consumer, have reduced the rate by almost one point compared to the April data, up to 12%. The good part is that it is the third month in a row that they have slowed down and that it is the lowest rate in a year. On the other hand, the not so good thing is that a 12% increase is still a very high percentage.
If the products are examined, it can be seen that the main increases with respect to May 2022 are recorded in sugar (46%), butter (25%) and olive oil (24%), despite that if the intermonthly rate is analyzed, that is to say, the comparison with the previous month, in these three cases there is a minimal increase or even a fall in inflation. On the part of the INE, it is emphasized that food moderation has a lot to do with the brake on the prices of milk, cheese and eggs.
On the other hand, underlying inflation, which does not account for energy or fresh food, has also slowed down. In this case, five tenths below what was recorded in April, with which it is placed at 6.1%. A still high value, although it is true that it has slowed down for three months since the peak of 7.6% in February.
“It is observed that the pace of price increases is already lower”, explains María Jesús Fernández, from Funcas, and, as an example, points out that, of the 199 subclasses with which the INE works, there are only 81 with inflation above 6%, while at the beginning of the year there were almost 100 that exceeded the percentage. For his part, Ángel Talavera, from Oxford Economics, points out that “food inflation is finally beginning to moderate, although it is still very high, with double digits. The dynamic should continue in the coming months and should bring general inflation below even 2% if energy prices are maintained.”
It is true that the underlying is taking longer to rise, but also that it is very difficult to moderate, and now it is going down this path, which will be slow. The forecast of the Funcas economists is that the average underlying inflation this year will be 6.4%, two tenths less than they predicted before the data that was released yesterday. Regarding general inflation, they calculate that in June it may drop to 2%, also thanks to the base effect.
The Spanish Government will take the data into account to decide in the coming days whether to maintain the measures in force against inflation. The First Vice-President and Minister of the Economy, Nadia Calviño, has explained these days that they will maintain the reduction in VAT on essential foods “as long as we do not reach price levels that are more appropriate”.
