Sunday, July 3

Inflation rebounded in May by 8.7% with fuel and food soaring

Inflation picked up again in May to 8.7%, as expected, compared to the same month last year, mainly due to the rise in fuel and food prices. The INE confirmed an increase in the CPI of 4 tenths compared to April (8.3%), while core inflation, which does not include energy or unprocessed food, increased by 4.9% compared to May 2021, a record of 1995 .

The OECD forecasts persistent inflation in Spain: 8.1% this year and still at 4.8% in 2023

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The INE (National Institute of Statistics) explains that the rise in the CPI (Consumer Price Index) year-on-year to 8.7% in May is mainly due to increases in fuel and food and beverage prices non-alcoholic. The latter set a record for 26 years (an 11% increase), highlighting bread and cereals, cheese and eggs, and meat. In the supermarket, the prices of legumes and vegetables fell.

And so did electricity, and without a cap on gas. The so-called Iberian solution to lower the electricity bill by 15% received this Thursday the endorsement of the Congress of Deputies – with the abstentions of PP and Vox and the only votes against from Foro Asturias and Nueva Canarias. The Lower House gave its approval a day after the mechanism agreed upon by Spain and Portugal received final approval from the European Commission, which has taken longer than expected to approve it, following the clarifications published a few days ago by the Portuguese energy regulator .

However, the rise in fuel prices took the interannual rate of the transport group to 14.9%, more than two points above that registered in April. A rise that is diluting the discount of 20 cents per liter of gasoline or diesel that the Government has maintained in force since April, and that will continue until the end of June, although it is already being debated whether it will be renewed in the Council of Ministers on 28 June.

persistent inflation

The bad data for May, after 7.6% in February, the peak of 9.8% in March, and 8.3% in April, and the acceleration of the core CPI justify that the Organization for Cooperation and Development Economic (OECD) foresees persistent inflation in Spain “due to the impact of the Russian invasion of Ukraine”. The agency estimates that prices will rise 8.1% this year on average and will still continue to rise 4.8% in 2023, according to the update to its outlook report, published this Wednesday.

It is one of the institutions that is most alert about price increases. Their expectations would indicate that companies will continue to transfer the increase in costs (due to the rise in energy and essential raw materials for industry or food) to sales prices, which represents a significant loss of purchasing power for families if wages do not increase.

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