Today more than ever it is highlighted how inflation becomes the so-called tax on the poor, since it hits the small saver the hardest, those with lower salaries and pensioners.
Prices began to climb in Spain at the turn of the summer of 2021, mainly driven by the price of energy, with which the average annual CPI closed last year at 3.1% after having been negative in the year . But what seemed like a very short-term increase whose effects would disappear in the spring, according to the first calculations by analysts, has turned into a real nightmare for the shopping basket, due to the effects of the war in Ukraine, which has already served a month.
The advance inflation data published by the National Institute of Statistics (INE) corresponding to the month of March, stands at an interannual rate of 9.8%, very close to the two-digit psychological level, after a monthly increase of 3% , which places this figure at the highest since that recorded in May 1985. It has taken 36 years to see this lack of control in prices in Spain, although everything indicates that this escalation will not stop here, it could even reach two digits shortly and even exceed them in some “decimilla”. The known figure is 2.2 points higher than the rate for the month of February of 7.6%.
And it is that behind this evolution, external geopolitical factors continue to weigh, such as the duration of the war in Ukraine and the tightening of the prices of strategic products such as oil or gas, which completely distort the prices of the energy component, which is manifested in rises in the prices of electricity, fuels and fuels and, due to the induced effect, food and non-alcoholic beverages. In this sense, the effects of the second round are also playing a prominent role in the consolidation of prices that could be considered punctual. Hence the continuity of the messages by the governor of the Bank of Spain to reach an income pact that mitigates this escalation.
The underlying rate, which measures the evolution of prices, excluding fresh food and energy products, reached an interannual rate of 3.4% in March, rising four tenths more than in February. A fact that, far from reassuring about future developments, anticipates upward tensions in the general indicator over the coming months.
The tsunami to which the prices of all the products in the shopping basket are being subjected have the most direct effect on citizens, a clear and increasingly profound loss of purchasing power. That is, with the same money you can buy fewer things. This fall in purchasing power is being felt especially in salary income and in the savings of families and companies.
Thus, it is relatively easy to make a quantifiable approximation of the money that this impact of the inflationary escalation could have on said income and that could be around 70,000 million euros of decrease in the purchasing power of salaries and deposits. How do you get to that figure?
The first thing that must be specified to make this calculation is how much prices have risen and for this, the fairest thing is to take not only the data for the month – in this case March, 9.8% – but also determine how much prices have risen on average in the last twelve months. This would show a measured increase in the CPI of close to 4.9% between April 2021 and March 2022.
Once this issue has been calculated, the wage income data included in the data from the Quarterly National Accounts, which is also prepared by the INE, and which show that the country’s annual wage bill amounts to around 600,000 million euros, are taken. . Bearing in mind that the average wage increase agreed in collective agreements at the end of last year for 8.3 million employees -which will increase to around 10 million throughout this year due to delays in registering agreements– was 1.47% and that so far this year this increase slightly exceeds 2%, it could be said that these workers according to the average inflation of the last twelve months (which is close to 5%) are losing between 3 and 3, 5 points of purchasing power. This translates into a loss of purchasing power of between 18,000 and 21,000 million euros.
In addition, the salary perspectives are not much better and, in the best of cases, if employers and unions reach the multi-year agreement of agreements that they are talking about, the recommendation for a salary increase for this year would be around 3%, with which that given the uncertainty of how prices will evolve, if the inflationary spiral continues, it could eat up that small improvement in wages throughout this year. Thus, the aforementioned loss of close to 20,000 million in salary income due to the impact of inflation would even be in the low band of possible losses.
The next account is even simpler, Spain has little more than a billion euros in savings deposited in current accounts. This money is practically not paid, so the impact of close to 5% would be complete, reducing an approximate amount of 50,000 million euros of the purchasing power of the savings of the Spanish. With the sum of both amounts, the aforementioned cost of 70,000 million in salary income and savings is obtained.
Within the monetary impact of the inflationary escalation is also the increase in the cost of the pension payroll, whose revaluation according to the average annual CPI, in this case, of December 2021 and November 2022 is guaranteed by law. If this is fulfilled, it will ensure that pensioners do not lose purchasing power despite the fact that prices continue to run wild, however, the bill for the public coffers of this revaluation could rise to an additional 8,000 million if the average annual CPI remained at the 5% of the last twelve months.
The rise in prices in 2021 that ended at 6.5% meant a cold increase in personal income tax of 4,110 million euros, 199 euros more per taxpayer.
The shock measures will avoid the double digit
The general director of Funcas, Carlos Ocaña, considers that the shock plan that the Government has approved will cushion the increase in the CPI for this year by one point, thus avoiding reaching double-digit rates. The director of the situation of this foundation, Raymond Torres, estimates that the government’s measures may place inflation at a maximum between March and April.
Jakob Suwalski and Giulia Branz, analysts at Scope Ratings, forecast by 2022 that the inflation rate will exceed 5% “even in a scenario of gradual convergence towards the ECB’s target of 2% by the end of the year.” If the scenario is one of continuation of price pressures, the annual rate would stand at an average of 8%. They believe that an ECB rate hike would not directly address the inflationary effects.
#Inflation #swallows #million #euros #wages #savings #months