The agency warns of the rise in the underlying CPI and believes the “significant loss of purchasing power” will help moderate the price increase
The unstoppable price increase is not exclusive to 2022, nor is the effect of the energy crisis. Core inflation – the most persistent, excluding fresh food and energy prices – rose 5.3% in Spain between July 2019 and July 2022.
This was stated by the Bank of Spain yesterday in a report in which it analyzes the culprits of the price increases during the period encompassing the pandemic through various sub-indices. The conclusion is clear: housing and tourism are the components that have weighed the most in this trend that is already being transferred to the general trend.
The agency is particularly concerned about the contribution of the leisure, restaurant and tourism sub-index, indicating that it explains 1.6 percentage points of July inflation, compared to just one point in the euro-zone average.
Not only does this sector weigh more heavily in the Spanish basket. The regulator makes it clear that the country also “has experienced a larger price increase in the past year”.
The problem is that this increase in the most stable components of inflation is uncertain. “It will depend on the evolution of the war in Ukraine,” say the economists. For example, the Bank of Spain is once again calling for control over wages and corporate margins, expecting “the significant loss of purchasing power” to moderate aggregate demand and price dynamics.
In that sense, they expect the Bank of Spain to see high inflation “lasting longer than expected”. This was also stated yesterday by the Director-General of the Economy and Statistics of the Bank of Spain, Ángel Gavilán, who took advantage of a presentation at the Madrid stock exchange to once again emphasize the doubts about the economic recovery. In fact, the institution predicts a slowdown in activity, which will be punished by the same “headwinds” weighing on the global and European outlook, such as inflation, uncertainty, the energy crisis or the tightening of financial conditions.
Speaking at the ‘Swiss Bankers Executive Study Tour’, Gavilán explained that despite the strong tourist season, there are already signs of weakening activity, such as employment, but also confidence and that of consumption and production. Of course, the chief economics officer highlighted the data for the second quarter, with higher-than-expected GDP growth driven by the reopening of the economy. However, he emphasizes the risk of inflation that continues to surprise on the upside and is already spreading to the entire consumer basket.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
