Barcelona2022, the year of skyrocketing prices, closes December with prices 5.8% higher than a year ago. This is one point less than the rate in November – when it was 6.8% – and almost half that in July, when it shot up to 10.8%. This is what emerges from the advanced data published this Friday by the National Institute of Statistics (INE), which concludes that the year ends with prices increasing by 0.3% in a month, but above all with numbers that remain alarming if we look at underlying inflation.
Variation in prices compared to a year ago
Rate of interannual variation of the CPI
This indicator is very relevant, as it tells us how prices evolve in the medium term, removing fresh food and energy products to consider them very volatile. Underlying inflation closes December at 6.9%, six tenths more than in November, due to a further increase in the prices of processed foods and tobacco. In this way, one is confirmed overtaking to general inflation, which is lower. It is not the first time that this effect has occurred which, according to the INE, already happened in 2009, 2014 and 2016, and more recently in 2020 due to the sharp fall in the price of oil with the outbreak of the pandemic.
It is not the first time that underlying inflation has ‘surpassed’ the general
Why has the general inflation rate moderated at the end of the year? The INE attributes this development to electricity prices, which have risen less this month than in December 2021, and to the fact that fuels also recorded a much sharper decline than last year.
For Àngel Hermosilla, technical secretary of the College of Economists of Catalonia, the aftertaste of this December data is “positive”. “The general CPI has been moderating along the lines of recent months and this time it has done so in an important way. It is a trend that was seen coming, but you also have to take into account the statistical effect and think about how they were things a year ago,” says the economist.
For the academic, however, there are factors that worry him, such as the fact that the energy component “goes up as quickly as it goes down”. “We have not yet entered a proper winter and this can prove some problems. At the moment the climatology is being benign and depending on this is dangerous”, insists Hermosilla. If 2022 was the year of urgent decisions to counteract the impact of the war in Ukraine on the electricity market, 2023 should be, he says, the year of rethinking the energy model that Spain wants: “The what is there now, like the gas cap, is conjunctural, but we have to look more in the long term. We have to try to deal with the factors that will condition our energy life in the coming years and this is not resolved. No you can make investments overnight.”
It is the fifth consecutive time that general inflation has fallen since the highs of the summer
The Spanish government has highlighted that this is the fifth time in five months that year-on-year inflation has fallen since the summer. In this sense, he also considers that the data “confirms the effectiveness” of the measures adopted by the executive to contain prices and limit the loss of purchasing power suffered by workers this year. So, he defends that the competitiveness of Spanish companies has been strengthened for the coming months and that the “opportunity” of the aid approved this week to reduce food prices is evident.
Evolution of consumer prices
CPI in Spain. Index 100=prices on January 1, 2020
Measures to make the basket cheaper
The new anti-crisis package aims to mitigate the impact of this escalation of the ticket to fill the shopping basket. On the one hand, there will be a new annual aid of 200 euros for families with incomes of less than 27,000 euros gross per year and assets that do not exceed 75,000 euros on December 31, 2022. Even so, the beneficiaries will be able to allocate it to whatever they want, not just food. In addition, the VAT of some food products was also adjusted: those of the first need will have a VAT of 4% to 0%, while in the case of oil and pasta there will be a reduction of 10 % to 5%. With this measure, the State hopes to obtain savings of 661 million euros for Spanish households.
Hermosilla believes that these aids will have a statistical effect on the data from the beginning of 2023, but it is not entirely clear whether this will also be felt in a significant way in the pockets of consumers. “When a check is given, the administrative process is more difficult; it would be easier to index the income tax and families would notice it immediately”, defends the economist. In addition, remember that many companies that have been taking part of the costs of inflation will also take advantage of January to revise their prices upwards.