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    CPI soars in July to 10.8% due to food and electricity prices


    July 29, 2022 - CE Noticias Financieras

     

      Madrid 29 JUL 2022 - 09:14CEST

      The pressure that prices are exerting on the Spanish economy remains. Thus, the advance CPI indicator published this Friday by the National Statistics Institute (INE), results in a rise of 6 tenths in July to reach a year-on-year rate of 10.8%, the highest rate in nearly 40 years, specifically since September 1984.

      This evolution has been the consequence of the increase in the prices of food and non-alcoholic beverages, and electricity, together with the evolution of clothing and footwear.

      However, it is worth mentioning the decrease in fuel prices, as a consequence of a certain moderation in the price of oil.

      The underlying rate, which excludes the most volatile items such as fresh food and energy products, also rose by 6 tenths of a percentage point to 6.1% year-on-year, the highest rate since January 1993.

      This evolution of prices, however, continues to be a heavy burden for the Spanish economy, which has caused all economic revisions to reduce GDP growth estimates and raise inflation estimates to an average of over 8%.

      Prices began to climb in Spain around the turn of the summer of 2021, driven mainly by the price of energy, so that the average annual CPI closed last year at 3.1% after having been negative for the year.

      But what seemed to be a very temporary increase whose effects would disappear in the spring, according to the first analysts' estimates, has become a real nightmare for the shopping basket, due to the effects of the war in Ukraine, which seems to be becoming chronic and has been going on for more than six months now.

      The tsunami to which the prices of products in the shopping basket are being subjected is also taking a heavy toll on citizens as a whole, reflected in a clear loss of purchasing power. Less can be bought with the same money. This fall in purchasing power is especially felt in wage income and in the savings of families and companies.

      A quantifiable approximation of the money that this impact of the inflationary escalation could have on these incomes could be around 110,000 million euros of reduction in the purchasing power of salaries and deposits, according to calculations made by this newspaper.

      Precisely for this reason, since the beginning of the year, the Governor of the Bank of Spain launched the idea of the convenience of making an income pact in order to prevent the rise in prices from being internalized in the economy as a whole, something that seems far from being achieved.

      At the beginning of July, after the failure of the social agents to achieve this pact by means of agreements on wage moderation, the economic vice-president called a meeting of this negotiating table in which she asked for moderation of margins and wages for a period of 3 years, although she did commit herself to raising the Minimum Interprofessional Wage (SMI).

      Recently, a report by the Institute of Economic Studies pointed out that labor costs would explain 83.4% of the increase in prices between 2019 and 2021.

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