Contributory pensions will rise by 3.8% in January, in accordance with the review mechanism in force since the end of 2021, in which their revaluation is applied automatically based on the average of the interannual CPI between December of the previous year and November of the present exercise.
The CPI closed the month of November at 3.2%, three tenths less than the previous month, according to the still provisional data released this Wednesday by the National Institute of Statistics (INE). The moderation of electricity, fuel and food has contributed to this trend.
The CPI data must still be confirmed on December 14, but the result announced today already allows us to know quite precisely what will happen to the pensions of more than nine million retirees, whose amount, according to the latest data offered by the Government, It is equivalent to about 12% of GDP.
“Pending confirmation of the November CPI data by the INE, pensions would be revalued next year by 3.8%, according to the formula established by Law 21/2021, guaranteeing the purchasing power of all pensioners” , they say from the Government.
The inflation data at the end of the year remains to be known, although for practical purposes retirees are guaranteed to maintain their purchasing power. In 2023 they have had an increase of 8.5%, compared to 2.5% in 2022 and 0.9% in 2021.
Law 21/2021, of December 28, incorporated in its article 58 the new mechanism for the review of pensions, in which the interannual average CPI between December of one year and November of the next is taken as a reference.
The rule specifies that the amount of the annual revaluation of pensions may not exceed the amount established for this purpose in the General State Budget Law (PGE) once the rest of the public pensions are added.
The previous increase in pensions, of 8.5%, has had a cost of close to 13.7 billion euros for Social Security, including the passive classes.
Inflation began the year at levels close to 6%, but moderated until it fell to 1.9% in year-on-year terms in June, at which time it rebounded to be above 3% since the end of the summer.
This is the progression predicted by economists, who expected an increase at the end of the year, although in recent days some of them were already predicting what has ended up happening: energy and food have given a slight respite.
The INE explains that the containment of price increases by three tenths is mainly due to “the decreases in the prices of fuel and tourist packages, greater than those registered in the same month of 2022.”
It also influences, according to what he says, that the increase in prices of food and non-alcoholic beverages is lower than in November of the previous year. In any case, the decrease in electricity prices has been less than in November 2022.
In monthly terms, that is, in the comparison of November versus October, prices have fallen by 0.4%, which represents the first decline since January.
In an assessment sent by her department, the First Vice President and Minister of Economy, Commerce and Business, Nadia Calviño, assures that “the advance CPI data for November is very good news”, since “general inflation drops three tenths to 3.2%, helped by electricity, fuel and also food”.
According to him, price containment means that “salaries continue to gain purchasing power and Spanish companies continue to gain competitiveness by increasing their market share, even in the difficult international context.”
Core inflation, which excludes energy and fresh food, stood at 4.5% in November, seven tenths less than the 5.2% of the previous month, intensifying its downward path. This variable had become a source of concern, after reaching levels of 7.6% in February.
The difference between the underlying and the general is now the smallest since at the end of 2022 the former began to exceed the second, which is an indication that the effects of the second round of the CPI are more controlled.
For the director of Economic Situation at Funcas, Raymond Torres, the November inflation data “shows that disinflation is taking hold”, among other things because the fall in energy prices “is filtering into the rest of the components.” “It is likely that food will also become more moderate,” he adds.
In his opinion, “the main unknown now is the anti-inflation package” applied by the Government, since “a reversal of the measures means an increase in the CPI of 1.5 points.” It seems that only the VAT cuts on energy and excise taxes on this product will be reversed, which could add between seven and eight tenths to the CPI. However, “this does not counteract the underlying trend of disinflation.” “It will only slow her down,” he adds. This should be the trend if there are no new geopolitical shocks.
Manuel Hidalgo, senior fellow at EsadeEcPol and professor at the Pablo de Olavide University, describes as “very good” the inflation data known today, which has been positively influenced by a moderation in the price of energy helped by the recent rains. that facilitate hydroelectric production and oil containment.
“Our estimates are that food has grown very little,” says Hidalgo. In the coming months, this component is expected to have a better statistical performance due to the base effect, due to which the strongest increases have already been recorded.
Also “very good news” is the drop in core inflation, to which processed foods seem to have contributed. “General and core inflation cannot be very far apart,” so this approach is a sign of normalization.
The head of Europe Economics at Oxford Economics, Ángel Talavera, agrees in describing the inflation data as “very good”, not so much because of the fall in the general index, which was to be expected, but because of the underlying index, which was higher than expected. .
“It is to be expected that inflation in processed foods, which is included in the underlying inflation, has dropped substantially in November,” he says. This decline “should partially offset the expected rise in energy inflation in the coming months, keeping general inflation more or less stable between 3% and 3.5%,” she says.
