In March, prices finally rose 9.8%, a record since 1985 for electricity, gasoline and food.

Inflation in Spain accelerated by 9.8% in March compared to the same month last year, in line with data published two weeks ago by the National Institute of Statistics (INE). This is a record in the Consumer Price Index (CPI) since 1985, after a 7.6% increase in February, also compared to the same period last year. The IPC has been above 5% for 6 months now.

The unusual rate of inflation in March responds to the turmoil caused by Russia’s invasion of Ukraine in international markets, which began to escalate in late 2021 over this serious threat, to the point of literally condemning the country. War CPI In the last few weeks.

Inflation reflects rising electricity, gas, fuel, industry-critical raw materials such as aluminum or steel, and rising grain prices, in which Russia and Ukraine are leading players around the world. And this March, supply problems were added due to road traffic disruptions, justified by precisely the increase in costs that affected staple foods such as milk, oil or flour.

Take an example to understand inflation. If a year ago, in March 2021, a family spent € 1,000 to cover all your needs: pay rent, bills, go out to dinner for a day or two, go to the supermarket and buy clothes. If he bought the same products this year, went to the same restaurants and bought the same items, he would pay 1,098 euros, according to INE. This difference (9.8% more) is what changed the average price of consumer goods and services in Spain last year, according to the CPI measured.

Electricity, fuel and food are the most growing

According to INE, the increase in CPI to 9.8% compared to the previous year is due to “rising electricity and heating oil prices; Increase in fuel prices for personal cars; “Rising prices for restaurants and residential services and food, especially fish and mollusks, meat, legumes and vegetables, milk, cheese and eggs in general.”

Excluding the reduction in special taxes on electricity and the variability of other taxes, the annual index reached 10.7% in March, nine tenths higher than the general 9.8%. This is reflected in the constant taxes on the CPI, which INE also publishes under these statistics.

In percentage terms, the largest increases are 107.8% for electricity, 83.0% for liquid fuels, 46.1% for “other oils”, 45.6% for diesel and 33.6% for gasoline. Paid and parking (-20.7%), mobile phone equipment (-3.2%), national travel packages (-2.9%), games and hobbies (-1.8%) and audiovisual equipment (-1) decrease (4%).

Record after the oil crisis

In the monthly variation, compared to February of this year, inflation increased the rhythm by almost three points. The maximum in this case has been set since 1977, in the wake of the oil crisis.

And if the core CPI, which measures price evolution by extracting the most volatile products from the shopping cart, such as electricity and food, was recorded, it accelerated by 3.4% in March, compared to the same month in 2021, a record since then. In 2008, after accelerating by another 3% in February.

Electricity distorted calculation

In the general calculation of the CPI (Consumer Price Index) by INE, the absence of electricity prices from the free electricity market (contracts at the rates of trading companies) distorts the official inflation statistics. In particular, it will be a reassessment of the electricity tax relative to the rest of the shopping cart, based on various comparisons and approximations with Eurostat figures (EU INE), even if the VAT reduction on electricity is excluded.

There is a variety of evidence that allows us to conclude that the electricity bill currently adds more than is needed to the overall CPI. You must first stop at the source of the distortion. INE’s current calculation exclusively includes regulated market prices (more volatile when responding to daily electricity generation), with a directly conditioned system imposed on gas generated in international markets in recent weeks. The turmoil of war.

Then, compared to other data or other countries, one can see in the statistics the effect of excluding free market prices, which INE itself has been trying to include for months, “but we have found problems with the information companies provide to us,” the agency acknowledged. The first announcement improved the inclusion of tariffs offered by electricity marketers in January 2022. Now, process-related sources are dragging it out until early 2023.

Gas limit “sinks inflation”

A joint proposal of Spain and Portugal to increase the price of electricity by a maximum of 30 euros per megawatt hour (MWh) will “sink” inflation, experts agree. The price of gas burned by combined cycle plants within the framework of the “Iberian Exception” mechanism agreed by the Council of Europe must be approved by the European Commission “by December” and will have “a very significant impact. And the Automated CPI (Consumer Price Index) ”and the current price escalation, said Ignacio Conde-Ruiz, UCM Professor and Deputy Director of Fedea.

The shock plan measures the government has already approved – such as fuel discounts – will ease inflation by almost one percentage point, according to the Funcas think tank, which forecasts an average CPI of 6.8% in 2022. The Bank of Spain raised the same estimate to 7.5%. Meanwhile, the Independent Fiscal Responsibility Authority (AIReF) leaves it at 6.2%.

A year ago climbing

Inflation has been rising since last spring, due to global trade disruptions, global supply difficulties, reactivation and demand explosion after the pandemic, overcoming periodic restrictions due to health reasons. The latest significant, Shanghai, the financial capital of China, has been restricted in recent weeks.

Although the annual index for February 2021 was slightly negative – compared to 2020, in March of last year it advanced by 1.2%, which aggravates the acceleration of this month of March 2022.

Inflation puts its losses on the poorest

Inflation is raging for the poorest families. According to various studies conducted by Eurostat for the entire eurozone, the lowest income is the one who spends the most money on basic goods and services in relation to their total costs, which is most emphasized.

In particular, the European household’s fifth-lowest income, calculated by debt rating agency Moody’s, spends 15% on food and 7% on electricity and gas supplies and various fuels. Meanwhile, the highest revenue spends only 11% and 4% of their total costs on the same products.

“These products have a very strict demand, which makes it difficult to find a substitute (you can stop the vacation if it is very expensive, but it is more difficult to limit heating, for example, during the winter months), so inflation increases. “It has an unequal impact on revenue brackets,” said Rita Sanchez Soliva, an economist at Caixabank Research, in a recent report.

“The perverse effect of inflation on the lowest incomes is disastrous because they spend most of their wages or incomes on commodities,” agrees Professor Josep Bertrand, who adds that “the higher the inflation, the higher it is.” VAT is paid, because the same interest is paid at a higher price. ”

Moody’s team of analysts in a historical analysis shows that “when oil prices rise, consumer spending on food is more sustainable than other costs.” In short, following the example of Rita Sanchez, it is easy to postpone a decision to use a cruise in an inflationary context, but one cannot do without buying bread.