From temporary to permanent. Inflation has become that uncomfortable friend who asks to stay home for a few days and ends up taking root on the sofa. The question is when will he leave. And the answer is not easy in the case of rising prices, despite the number of analysts, organizations or governments trying to find it. Spain will know the advanced indicator of the CPI for July this Friday, but two more weeks will have to pass to know in detail how prices have behaved this month. Until then, clues can be found in the latest known data (June) that left consumers with bad news: the famine, far from abating, seems to be accelerating.
An analysis of the 200 sub-classes (categories of goods or services) into which the consumer price index (CPI) is divided shows that 67 of them became more expensive in June than in May. A month earlier, there were only 45 commodities whose price history showed this behavior.
Another way to see it is through the general index. In April it eased slightly (-0.2%) and in May it fell to 0.8%. In other words, the difference between those two months was one percentage point. Since it was 1.9% in June, this means that it is up 1.1 points. A tenth may seem small, but it isn’t when you analyze how many subclasses were above that limit. In the fifth month of the year there were 12; in the sixth 24. In other words, the number of categories that can be considered super-accelerators of inflation (by growing faster than the general index) doubled between May and June.
There is a consensus among analysts that the data leaves few positive readings at the moment. Miguel Cardoso, chief economist for Spain at BBVA Research, admits that June headline inflation (10.2%) exceeded his forecasts by more than a percentage point. “The problem isn’t just that,” he elaborates, “but that the underlying is growing by 5.5%, and that’s important because it marks the trend forward.” For Cardoso there is no doubt: “We are experiencing one [inflacionista] widespread and probably prolonged. María Jesús Fernández, Senior Economist at Funcas, insists on the existing uncertainty: “It’s hard to know if inflation is accelerating, but it’s certainly not slowing down.”
Fernández points out that “alongside energy products, food weighs the most”. Looking at the sub-classes that experienced the most price swings in June, these two broad categories stand out. In energy, all items itemized by INE grew faster than the overall index, with the exception of natural gas and town gas, which were flat. When it comes to eating, on the other hand, there is more variety in behaviors, with the pull of vegetables and fresh vegetables being noticeable, two items that carry a lot of weight in the shopping basket.
most expensive tourism
The other big trend found in the latest numbers has to do with goods or services related to tourism. Except that campsites, all subcategories of the statistics that can be assigned to travel became more expensive. In fact, national tourist packages were the subclass that showed the greatest variation from May to June. International package tours, flights or hotels, hostels and similar accommodations are also creeping into the top spots.
The Funcas expert observes “an important part of the demand dynamics”. In other words, before the arrival of summer, these services have gone up in price because more people are using them. But in the long run, fuel and food are the deciding factors, he says. “They’re the first thing we need to look for in order to identify the moment when these inflationary tensions start to ease,” says Fernández.
The influence of the Ukrainian war on the situation is undeniable. This has implications for the international markets for oil and derivatives, gas or grain (also relevant for other food products as they are used to produce animal feed). For consumers, it translates daily into what they pay when they turn on the light, get gas or fill up the car at the supermarket. However, these are very volatile products in price and for this reason are excluded from the core inflation calculation. The BBVA Research expert asks to also pay attention to services: “They are indicative in the medium and long term because they are the ones that take the longest to change in price,” explains Cardoso.
Barely months ahead
Services have a weight of almost 40% in the CPI. And at the moment they resist better than other product groups. His behavior in June was similar to that in May. The best example is restaurants, the most relevant subclass, which has grown by exactly the same percentage month-on-month since April (0.7%). But that means that while they’re not getting any faster, they’re getting more and more expensive, and that eating out is costing 5.2% more annually than it was 12 months ago. Will this trend continue? Cardoso believes that “the increase in service spending towards the end of the year is not sustainable”. And he raises a question: “When we get back from vacation, will people continue to date like we haven’t dated in three years?”
The answer he gives himself is “certainly not”, but experts also believe that the summer is not conducive to a price decline. “In these months of July and August, I very much doubt it,” concludes Fernández. Both Funcas and BBVA are only considering small fluctuations in the short term. A sustained drop in inflation will still be months away, but the economist sees “hopeful signs” on the international commodity markets, which have eased in recent weeks. The question remains, “whether it is a matter of a selective decline or a consolidation”.
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