Gasoline takes over from food as the biggest enemy of our pockets

Gasoline takes over from food as the biggest enemy of our pockets

2023-09-12 09:09:09

Barcelona Fuel prices pushed up the cost of living for families in August, although food prices moderated increases after months with strong increases, according to data from the index of consumer prices (CPI) for last month published this Tuesday in a statement by the National Institute of Statistics (INE).

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In Catalonia, the cost of living in August climbed 2.5% over the same month last year, a figure two tenths higher than the 2.3% year-on-year recorded in July. In addition, prices increased by 0.5% between the end of July and the end of August, a growth rate also two tenths above that of last month.

Feeding begins to slow down

General consumer price index (CPI) and for three consumer items in Catalonia. Index where 100=January 2020

The INE has confirmed that prices in Spain climbed by 2.6% compared to the same month in 2022, as the body had already advanced two weeks ago. Compared to July, the prices of services and consumer goods increased by 0.5%. In terms of underlying inflation – which does not include the cost of energy or fresh food, which are more volatile -, it grew by 6.1% compared to a year ago in the State as a whole, a tenth less than the year-on-year rate recorded in July.

Precisely the underlying inflation is one of the indicators that most demonstrate the solidity of inflation in the last year and a half. The head of the study cabinet of the Barcelona Chamber of Commerce, Joan Ramon Rovira, points out that “the downward trend is practically unappreciable” and shows that it will be “costly” to return the CPI to around 2%, the figure marked as a target by the European Central Bank.

The economic vice-president of the Spanish government, Nadia Calviño, has boasted that the State has the lowest inflation in the European Union. “Spain is consolidating itself as the European economy with more growth and less inflation, which benefits the competitiveness of our companies and also the purchasing power of wages,” Calviño pointed out in a statement, which also said that the economic policy of the state executive “works”, since it has allowed “inflation to be lowered by eight points in the last year in an inflationary context throughout Europe”.

Feeding slows the climbs

Of the entire shopping basket, food had been the element with the strongest price increases in recent months, a trend that the figures for August indicate could slow down: in Catalonia the cost of food increased just 0.1% month-on-month, well below the 0.5% recorded between June and July.

In fact, a study by the Barcelona Chamber of Commerce published in February of this year already pointed out that the cost of food would be the main inflationary element for much of 2023, but predicted a slowdown in price increases from summer, thanks to processed foods (those that are not fresh). “It’s what’s happening,” affirms Rovira.

In Spain as a whole, food prices rose by 0.2% in August. According to the INE, the element that most contributed to this increase was oils and fats, a fact derived from the shortage of olive oil and the consequent increase in prices in supermarkets. Vegetables and legumes and, to a lesser extent, fish and meat have also increased in price, but much less.

Fill the tank, more expensive every week

Fuels have therefore once again become the inflationary engine in Spain. Petrol and diesel have been on a string of price rises over the past eight weeks and the price per liter of fuel is at its highest levels since July 2022, when it hit a ceiling amid widespread oil and commodity price rises energy due to the Russian invasion of Ukraine.

These increases in the cost of fuel have a direct impact on the transport item of the CPI, which in the case of Catalonia became more expensive by 3% between July and August, a notable increase. The root of these increases is the rise in the cost of a barrel of oil on the international markets as a result of the decision of the producing countries, among which is Russia.

Despite this, the energy situation is not the same as in the months immediately following the start of the war, the spring and summer of last year. This August the price of natural gas, soared for much of 2022, has fallen, which has been noticed in the item dedicated to housing (which includes expenses such as the gas bill, but also the light or water, among other household costs), which reduced prices by 0.4% in just one month in Catalonia.


Increase in the prices of consumer goods and services in Catalonia in August, compared to a year ago

According to Rovira, the cheapening of oil is one of the key points to understand the brakes on the escalation of prices this year, a fact that with the recent increases in the cost of crude oil may change soon. In fact, if you remove energy in the calculations of the CPI of the last months, “the drop in inflation disappears”, adds the economist of the Chamber.

In this sense, services have experienced price increases that have made them the other major factor that pushes up the CPI, a phenomenon that is due to “the transmission of business costs” to final prices, says Rovira . The rise in energy prices and the -albeit very moderate- wage increases in sectors such as hospitality and trade have led many companies to increase prices and at the same time increase profit margins.

In the near future, however, these margins “will moderate if the pace of economic activity slackens” and, therefore, companies see their business volume fall, a fact that most international organizations predict for the months that remain from this 2023. They also point out that Spain will be one of the states least affected by the economic slowdown in the Old Continent.

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