Prices continued to moderate in December for the fifth consecutive month as the year-on-year inflation rate stood at 5.8%, one point less than in November and its lowest figure since November 2021, when it stood at 5.5%. according to provisional data published today by the INE. However, core inflation -which excludes energy and fresh food prices- increased six tenths, to 6.9%, driven by higher food prices.
The cheaper electricity and fuel compared to the figures from a year ago explain the downward trend in the general rate of inflation. In the opposite direction, the prices of processed foods and tobacco skyrocket. And the prices of clothing and footwear have also contributed to the rise, which have decreased to a lesser extent than they did in December of last year.
December to November
The CPI rises three tenths in the monthly rate
The data for December is five points lower than the peak reached in July, when inflation reached a historic 10.8%, its highest level since September 1984. Since then, prices have moderated month by month, at the same time that there has been the greatest rise in decades in food prices, which have risen by 15.3% compared to a year ago -according to the latest data available for November-.
In monthly terms, the CPI registered a rise of three tenths, compared to the decrease of one tenth of the previous month. While Spanish twelve-month inflation harmonized with the European Union was 5.6%, below the 6.7% in November.
The Government has abolished VAT on vegetables to cushion the effect of inflation
What is most worrying is core inflation, whose rate is still skyrocketing and is seen as an indication of the extent to which inflation is structural. In November it rose one tenth, to 6.3%, and this December it has continued to climb until it is above the general rate of inflation, something that has not happened since February 2021.
Despite this, the Government makes a positive assessment of the latest CPI data and downplays the rise of the underlying, which considers that “it is logical” that it is taking longer to fall “because it took longer to rise”, commented the first vice president of the Government and Minister of Economy, Nadia Calviño, in statements to the String Ser.
In order to control prices and alleviate the pockets of consumers, the Government approved this week its third package of anti-crisis measures, among which stands out the reduction and abolition of VAT on basic foods for half a year, a measure that will be withdrawn if inflation underlying decrease of 5.5%, as well as a check of 200 euros with rents of less than 27,000 euros per year and the freezing of rental prices that are renewed for six months.
read also
Added to these measures are others already in force such as free commuter train tickets and discounts on urban transport, a 2% limit on rent increases and a tax reduction on electricity and gas. Also the discount of 20 cents per liter on fuel that ends for private customers as of January 1. Initiatives that aim to relieve the pocket of consumers and also stop the escalation of prices. In this sense, Spain registered the lowest inflation in the European Union in November, with a rate of 6.7%.
Despite this, the General Council of Economists increases its inflation forecast for 2023, which stands at 5%, one point more than in the previous balance and a percentage similar to the latest estimate of the Bank of Spain (4.9 %, counting on the extension of the anti-crisis measures). For this year, economists estimate that the average CPI will be around 8%.
Second-round inflation risk
The revaluation of wages remains well below the rise in prices
On the other hand, the year-on-year CPI data for December, which must be confirmed on January 13, serves as a reference for calculating the revaluation of wages in agreements with safeguard clauses. However, they point out from UGT, the increases that the agreements that are being signed reflect on average are much lower than the increase in the cost of living -2.69% until November-, so many consumers will suffer “a significant” reduced purchasing power.
While the general secretary of the CCOO, Unai Sordo, denounced in an interview in Europe Press that companies “are trying to block many collective agreements, or are making very low salary proposals”, while accusing the Government of having “dynamited” with the anti-crisis measures adopted from “unilateralism” a possible income agreement. In any case, wage moderation removes the risk of second-round inflation.
read also
