Inflation in Spain has exceeded the two-digit psychological barrier in June for the first time since April 1985, when the Consumer Price Index (CPI) shot up 10.2% year-on-year, the same increase that occurred in that month 37 years ago.
As the National Statistics Institute (INE) has advanced this Wednesday and will have to confirm in mid-July, inflation was one and a half points above that registered in May, which reveals the measures approved to date to try to contain the escalation of prices -such as the discount of 20 cents per liter on fuel- which, for the time being, have not been very effective in curbing this indicator.
Core inflation -which does not take into account the price of fresh food and energy products because they are the most volatile and which serves as a thermometer to know the contagion of the rise in prices to the economy as a whole- rose in June by 5, 5%, the highest rate since August 1993.
This evolution is mainly due to the rise in fuel prices, higher this month than in June 2021, and of food and non-alcoholic beverages, compared to the stability registered the previous year. The increase in the prices of hotels, cafes and restaurants, higher than last year, also influences, as explained by the Institute.
Prices began to rise in Spain in the summer of last year, with the CPI going from 2.7% in May and June to levels above 3% in summer and exceeding 5% in the last quarter of the year. This year, the index reached its highest level in March, after the war broke out in Ukraine, with an increase of 9.8% and since then it has remained above 8%.
So far in 2022, average inflation stands at 8.45% and the percentage that will be used to revalue pensions – the average from December 2021 to November 2022 – is currently at 8.2 %, which will condemn Social Security to a sharp increase in public spending.
Organizations such as the OECD have already predicted that inflation will be on average 8.1% this year and that in 2023 it will continue to be very high, until closing the year with an average rise in the twelve months of 4.8%, one of the highest of the European Union and ahead of economies such as France, Germany, Italy, Portugal, Greece and the average for the Eurozone as a whole.
The Executive already approved in April a first decree to deploy a series of measures that would serve to contain inflation, such as the discount on gasoline, the extension of tax cuts to electricity or the 2% cap on rent increases . However, these policies have not served to extend the downward path that the CPI seemed to have embarked on in April, moderating from 9.8% in March to 8.3%.
In May, inflation rose 8.7% and in June it seems to have exceeded 10% for the first time since 1985.
Last week, the Government approved in the Extraordinary Council of Ministers a second package of measures against inflation, in which fuel aid was extended, tax rebates were extended and direct aid was implemented to compensate for the rise in prices for the families. These expansionary measures, however, could continue to contribute to the rise in prices.
For its part, the Iberian exception approved by Brussels that should alleviate the price of electricity for the time being has not caused a substantial reduction either, since the compensation for gas offsets the possible savings.
The President of the Government, Pedro Sánchez, and his First Vice President, Nadia Calviño, assure that the policies they have approved have served to lower inflation by at least 3 points, although they do not justify how they arrive at that calculation and according to data from the INE itself the cut had barely reached a point in the month of May -the last for which the CPI data is available at constant policies-.
It is true that since the INE measures the price of fuel once the discount has been discounted and not the price at the pump, in the absence of this discount, inflation would be even higher, but how much is unknown.
In statements on Cadena Ser this Wednesday, Sánchez reiterated that the measures put in place by the Government have prevented inflation from being “4 points” higher than seen, again without justifying how he arrives at that calculation.
He also pointed out that the inflation figure demonstrates “the seriousness” of the situation resulting from the war in Ukraine, as well as “the suitability” of the measures taken by the Government and the need to continue working, especially in the electricity market since European scope.
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