The rate is reduced by lower fuel prices, but underlying inflation climbs even further to 6.4%, the highest since 1993
In the month of August, prices moderated compared to July, but very slightly. The rate goes from 10.8%, the highest in 40 years, to 10.4%, still above two digits for the third consecutive month, according to data released this Tuesday by the INE. The slight drop in the CPI rate is due to fuel prices, which have been falling for a few weeks since the highs they reached in June.
On the other hand, the main causes of this high inflation were energy and fresh food, confirms the INE, in addition to restaurants and tourist packages, although all the products in the shopping basket are already skyrocketing after months of increase of the cost of electricity and the problems in the supply chains, which complicate imports.
This is demonstrated by the core inflation data, which stood at 6.4% in August, a rate that does not take into account energy products or fresh products and that experts fear will be much more persistent over time. They are three tenths more than the July rate, reaching a level not seen for decades. In fact, core inflation just a year ago stood at 0.7%.
Government optimism
The Government considers that the evolution of inflation has already begun its “moderation” path and explains in a statement that the peaks have been registered in the months of March, when Putin started the war, and June, when Russia reduced the supply of gas to Europe. “The slowdown in inflation coincides with the implementation of the Government’s packages of measures, which demonstrates the effectiveness of the measures adopted,” they say.
The economic vice president, Nadia Calviño, explained in an interview on TVE that “it is normal” that once the escalation of inflation begins due to the energy crisis and the problems in the supply chains, there will be a “rise in the prices of all goods. But she has predicted that this trend “has to stop in the coming months” and that we return to “more normal levels of inflation” next year.
Despite the optimism of the Executive, inflation has been at its highest since the beginning of the year. January marked 6.1%, a rate that now seems even low. But in February -coinciding with the start of the war in Ukraine- it began its rapid escalation, reaching 7.6%, which became 9.8% in March. In April it moderated 1.5 points of impact, down to 8.3%, but it was only a mirage. In May it climbed to 8.7% and in June it reached 10.2%, despite the implementation of the cap on gas and the rest of the new initiatives of the Executive to try to contain it. July hit the maximum at 10.8%, a rate that is now down but only four tenths.
Evolution in the coming months
There are signs that prices may have peaked. Oil and raw materials (such as aluminum or cereals) continue to fall from the highs reached in February and March. This, together with the free or reduced price of public transport that starts on September 1, should lower the CPI rate for next month. However, the situation depends largely on international factors and electricity prices continue unabated despite the Iberian ceiling that limits increases.
On the monthly side (August over July), the IPC registered a rise of one tenth, compared to the drop of three tenths experienced in July. Being a lower increase than that of August 2021 (five tenths) causes the year-on-year rate to moderate to 10.4%. On September 13, the INE will confirm this information.
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