Tuesday, December 7

The CPI stood at 5.4% in October after electricity soared 62.8%

The National Institute of Statistics (INE) this Friday estimated the CPI for October at 5.4%, the highest rate since September 1992 and one tenth less than the leading indicator in the middle of last month. Inflation, at a high of 29 years, thus accumulates eight consecutive months of increases driven mainly by energy products and especially electricity, with a stratospheric year-on-year increase in the electricity bill that the body figures at 62.8% , the highest rise in the historical series for this product.

In light, which in October became 10% more expensive compared to September, is added the rise in fuel as a result of the rise in oil in international markets, in a context of spiraling energy prices around the world, in parallel with the global recovery after the pandemic and the supply crisis due to the traffic jam in the production chains.

Thus, in October gasoline became more expensive by 26.5% year-on-year and diesel by 30.5%, according to the INE. The rise in the price of this last fuel is one of the arguments that the transport sector uses for the stoppages that it has announced this week for Christmas Eve. The upward spiral, for the moment, is limited to energy products, with the exception of olive oil, whose year-on-year rise is 26%, according to the INE.

The cost of living thus chains eight consecutive months of promotions, in a trend that is global and that has led to inflation in the United States in October at 6.2%, the worst figure in 30 years, which has the expectations that this upward spiral will be transitory has been removed and has led the Federal Reserve to begin a tightening of its monetary policy that, for now, is not in sight in Europe.

The official discourse on this side of the Atlantic is that the inflationary phenomenon is temporary and there should be no second-round effects, that is, that there should not be a general transfer to prices and wages. According to the INE, in October the annual variation rate of core inflation (general index excluding non-processed food or energy products) increased four tenths, to 1.4%, as the agency advanced a few weeks ago. With this, it is four points below that of the general CPI. This is the highest difference between the two rates since the beginning of the series, in August 1986.

Change of methodology

The record rise in the electricity bill is partly conditioned by the fact that to calculate the evolution of the price of electricity, the INE only takes into account the slightly more than 10 million consumers benefiting from the regulated rate of the voluntary price to the small consumer (PVPC), and not those of the free market, which for years have been the majority (more than 16 million).

The agency prepares changes in the measurement of this parameter that it expects to have ready for January. The current measurement system distorts the statistics because the increases in the bill are being higher for now in the PVPC (which nevertheless in the long run is the most advantageous option for the consumer), since the cost of energy is directly indexed to the price of electricity. wholesale market.

In October, as a result of the upward spiral in natural gas, the pool averaged over 200 euros per megawatt hour (MWh), compared to 36 euros in an unusually low 2020 due to the effect of the pandemic.

Faced with the spiral of increases in the bill that began in summer due to the exponential rise in gas, the Government has opened a battle in Brussels to try to de-index the prices of this raw material from those of electricity due to the design of the marginalist market. Meanwhile, and to try to cover these increases and fulfill the promise that the receipt will end the year at levels similar to those of 2018, the Executive approved in September a Royal Decree-Law to drastically lower the charges (regulated part of the receipt) with a mechanism for reducing the extra income from non-gas technologies that put companies on a war footing.

Given the announcements of shutdowns in various industries and pressure from electricity companies, the Executive ended up rectifying this measure at the end of October, saving long-term bilateral contracts from being cut. This is going to make, according to the electricity companies themselves, that the cut is much lower than expected, and the Executive has opened a round of contacts with renewable producers who have a guaranteed return (with a profitability of 7.4%) with in view of a possible advance of the return of the extra income that must be repaid in the future.


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