Inflation rose by one tenth in April, to stand at 3.3%, while the underlying inflation, which does not take into account energy or fresh food, moderated by four tenths, to maintain by 2.9%, according to the advanced data published yesterday by the National Institute of Statistics (INE).
It is the first time in a year and a half that the underlying is below the general; a movement that is determined by the progressive deceleration of this inflation, which is considered more indicative of fund flows, together with the slight rise in the general index. The lines cross.
The reasons for the one-tenth increase in general inflation must be found in the increase in gas prices, which fell in April 2023, and in food prices, which were higher than registered the same month last year, with the consequent statistical effect. It is also influenced by electricity prices, which, although they are falling, are less than in the same month last year. The effect of the return of the 21% VAT is noticeable in both electricity and gas. The normalization of taxation comes at a price when inflation rises. It happened in January, March and also, although more moderately, in April.
On the other hand, the reduction in the prices of leisure and culture, which had risen last year, led to a decrease in the inflation rate.
The positive news is the brake on the rate of increase in underlying inflation, which remains at 2.9%, until it is below the general index for the first time since November 2022. “The moderation in underlying inflation is a good sign, and it has moderated more than we expected”, says María Jesús Fernández, senior economist at Funcas. He also adds that this slowdown could indicate that services, which were the sector in which it was more difficult for them to lower prices, are also moderating. It is also positive that, month-on-month, the underlying has risen by six tenths, which is less than the point at which it rose on average in April over the period 2015-2019.
Since the beginning of the year, the three spikes in general inflation that have occurred, in January, March and April, have been largely motivated by electricity and, more specifically, by the increase in ‘VAT, which has returned to the usual levels of 21%, after being lowered for a long time, first to 5% and then to 10%. The last increase was in March, determined by the exceptionally low prices of the wholesale price, which led to an early recovery of 21% of the VAT.
The effects are noticeable. For example, economists estimate that this return to fiscal normality is responsible for three of the four tenths of the rise in inflation in March. There are still no precise data for April.
In the intermonthly comparison, that is to say, from April in relation to March, inflation increased by seven tenths, so that it registered the fourth consecutive increase since the beginning of the year. In this case, it was a month-on-month increase very similar to that of the same month in 2023.
The Minister of Economy, Carlos Cuerpo, described the inflation data as “good” and “stable”. “Price moderation, job growth and we will wait until tomorrow to see GDP growth in the first quarter, but these are good data, which are noteworthy and are consistent with the good management of this Executive”, he added.
On whether the political uncertainty can affect the economy, after the unprecedented process that has been experienced in the last five days, the minister said that “it is clear”, following these latest economic data, that the evolution of the economy continues to be “very positive”, beyond “all this political noise”.
On May 14, the INE will publish the final inflation data for April and will allow the details of the rise in food and electricity to be known. The clue that we are given at the moment regarding food is that this month they rose more than in April last year, when they recorded an increase of 0.3% month-on-month.
The forecast is that in the coming months general inflation will continue to experience ups and downs, with increases in the coming months and decreases afterwards. Economists place the average inflation this year between 3% and 3.2%.
