It is noticeable in the supermarket and now it is seen in the statistics. The price escalation does not stop. Inflation reached 10.8% in July, the highest rate since September 1984 according to the leading indicator of the National Institute of Statistics (INE). The rise in the CPI almost multiplies by four the average rise in wages agreed by agreement in Asturias, which is 2.85% according to data from the Ministry of Labor. The gap grows, up to eight points, and with it the purchasing power decreases. To maintain the same rate of acquisitions as in 2021, when the pandemic was still imposing restrictions, Asturian households will have to spend an additional 2,800 euros per year.
In June, inflation reached an annual rate of 10.2%, the highest level in 37 years, which triggered all the alarms and precipitated a new plan of measures by the Government, which included a temporary tax for the extraordinary profits of banks and energy companies. Now, in July, the CPI has shot up again, up to 10.8%, and this despite the fact that fuel prices have fallen and the cap on gas prices is applied to contain the electricity bill.
After starting in energy and intensifying with the war in Ukraine, the rise in the general level of prices has been transferred to the economy as a whole. The INE highlights that the increase in the CPI is mainly due to the rise in food and non-alcoholic beverages. It is also caused by the rise in electricity – which in July 2021 had registered a price drop that has not occurred this year despite the application of the gas cap – and the behavior of clothing and footwear, whose prices fall less than last year because in the current context the sales season has had fewer discounts.
In the opposite direction, in July there was a drop in the price of fuels in parallel to the drop in oil prices. According to data from the Ministry for the Ecological Transition, the average price of a 95-liter gasoline at service stations in Asturias is 1,930 euros, compared to the 2,143 it cost as of July 1. For its part, the liter of diesel A costs an average of 1,906 euros compared to 2,088 on the first day of the month. This drop, added to the state discount of 0.20 euros, will alleviate the cost of travel in this operation from August.
Core inflation, which excludes the prices of energy and unprocessed food -the most volatile-, rose to 6.1% in July, which is the highest level since January 1993. Given this circumstance, the Government insists on the need for an income pact to distribute the efforts in the face of the escalation of the general level of prices.
The salary increase agreed in the collective agreements in Asturias was, until June, 2.85%, eight percentage points below the inflation in July. There will be a sharp loss of purchasing power.
The average expenditure of Asturian households was 26,092 euros last year according to the INE and if the annual increase in July prices is applied, the amount of expenditure will increase by 2,818 euros. It is an estimate of the effort that rising prices may entail for households.
The director of the International Situation and Analysis of Funcas, Raymond Torres, expressed his concern about the loss of competitiveness for the Spanish economy, which may lead to higher inflation compared to other countries in the euro zone, where the average is 8.9% according to Eurostat. Torres highlighted the need to monitor the evolution of energy in the coming months, but also underlying inflation with a buoyant tourist season that could lead to “runaway inflation in the services sector.”
Inflation is forcing changes to forecasts for economic growth. However, the Spanish economy grew by 1.1% between April and June, driven by the rebound in household consumption according to the national accounting preview published yesterday by the INE.
The growth of Spain has accelerated 0.9 points compared to the first quarter of the year, in which the sixth wave of coronavirus and the beginning of the invasion of Ukraine caused a contraction in household consumption that stopped the growth of GDP in its tracks and left it at 0.2%.