The rise in energy prices made the September slope that households faced after a particularly expensive vacation even steeper. Inflation climbed this month to 3.5%, according to the National Statistics Institute (INE). The agency attributes this figure, nine tenths higher than that recorded in August, mainly to the rise in electricity prices and, to a lesser extent, fuel prices. Looking at the monthly rate, inflation also rose by two tenths of a percentage point. Experts predict that the Consumer Price Index (CPI) may still rise somewhat more this year, mainly due to energy and a statistical effect. Even so, the three-tenths drop in core inflation, which stood at 5.8%, indicates that the underlying trend of decelerating prices is continuing.
In the summer of 2022, the governments and central banks of the euro zone embarked on an all-out battle against inflation. And so far, they have succeeded in tamping it down. Spain left behind double-digit rises to reach 1.9% in June thanks to the plunge in energy prices and the relief measures implemented by the government, ranging from discounts on public transport to tax cuts on basic foodstuffs. After learning the data, the Ministry of Economic Affairs has considered that "the economic policy measures adopted by the Government are favoring the competitiveness of Spanish companies, the gain in market share and the increase in the purchasing power of salaries".
However, inflation is still far from the 2% target set by the European Central Bank, which it does not expect to reach until 2025. The agencies and research services believe that the CPI will be between 3.5% and 4% this year in Spain. Not only the 2.18 million workers whose salaries are indexed to the CPI, but also other groups, especially pensioners, are awaiting this figure. The remuneration of these is calculated with the average inflation recorded between November 2022 and 2023, which Funcas estimates to be 3.9%.
The CPI data now accuses the so-called base effect, i.e. of last year's statistical benchmark. But also the rise in energy prices and some foodstuffs, such as olive oil, due to the drought. The director of Coyuntura de Funcas, Raymond Torres, believes that the underlying trend remains the same: the relaxation of inflation in the medium term. "That dynamic is not changing. We could fear another shock in energy prices, but we see that this rise is very concentrated in oil. We are not seeing significant increases in gas, despite the strikes in Australia, nor in most commodities," he maintains.
Torres, moreover, does not see the factors that would need to be in place to trigger an inflationary spiral. One: wage increases, which the ECB is watching closely, are stronger than in 2022 but not exorbitant. According to the Ministry of Labor, up to August the wage increases agreed by collective bargaining agreement were 3.38%, which in Torres' opinion reflects rather a recovery of purchasing power lost in recent years. And two: companies in the past passed on a good part of the increase in costs to prices, increasing their profit margin. "Now that is going to be more complicated because of the slowdown," he says.
The good news is that the figure is better than expected by analysts, who had expected September CPI of between 3.7% and 3.9%. Moreover, core inflation, which excludes fresh food and energy prices, also confirms that prices have not left the path of moderation. In September, it fell by three tenths of a percentage point to 5.8%, the lowest level since last year.
The slump in the euro, which is just above $1.05, is also being a source of inflation, as most energy contracts are still denominated in euros. The exchange rate is in fact giving arguments to those who believe that the ECB should go further in its tightening of monetary policy, for example, through a faster reduction of the government bond portfolio. So far, however, the ECB has warned that its main tool for fighting inflation is interest rates. The governor of the Bank of Spain, Pablo Hernandez de Cos, recalled last weekend in an interview with the Börsen Zeitung that using one lever and not another has been a Frankfurt choice. "It's important to keep that in mind," De Cos said. "We have done a lot very quickly in terms of raising interest rates and we are confident that with the steps we have taken so far we will reach our medium-term target," he maintained.
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