The Funcas think tank estimates that inflation hit March

Inflation accelerated by 9.8% in March, compared to the same month in 2021, which was a record in 1985. 47% of goods and services account for the shopping cart, which the National Institute of Statistics (INE) calculates the Consumer Price Index (CPI) saw more than 4% increase, with electricity (107%), fuel (83%) and food up in the sky. Advance in February was 7.6% in February. And already 6 months more than 5%. The peak is suffocating, especially for poor families, but may already begin to slow down.

“Inflation will peak in March and is expected to decline in April, but it will remain very high throughout the year,” the Funcas think tank said in a note released Wednesday.

“Despite a higher-than-expected result last month, the central scenario forecasts an average annual rate of 6.8% unchanged in recent weeks due to falling oil prices,” he said. The Bank of Spain raised the same estimate to 7.5%. Meanwhile, the Independent Fiscal Responsibility Authority (AIReF) leaves it at 6.2%.

Funcas’s central scenario is “dependent on the evolution of energy prices.” According to his calculations, “in an alternative scenario, when the price of oil rises to $ 120. [actualmente está en 106 dólares por barril]The average annual rate will be 7.8%. And if the price of crude oil falls below $ 90, the average annual rate will be 5.9%.

In a similar vein, First Vice President and Economy Minister Nadia Calvinio explained Wednesday that “no one knows” that the fundamental cause of this inflation is energy, both electricity and hydrocarbons, given who remembers that the government “changed” Significant discounts on gasoline, diesel and diesel. ”

Thus, he considered that “now it is important for both oil companies and gas stations to contribute to lower energy prices,” because, as he explained, “the price of oil in international markets has been falling for several weeks and that. “Retail prices should be mentioned and should reach the pockets of citizens.”

For the time being, various institutions agree that shock plan measures approved by the government, such as fuel discounts, will alleviate inflation by an average of one percentage point throughout the year.

It will be necessary to include a joint proposal of Spain and Portugal with a maximum price of 30 euros per megawatt hour (MWh) to reduce electricity prices, which will “sink” inflation, according to experts.

Within the framework of the “Iberian Exception” mechanism agreed by the Council of Europe, this price limit for the price of gas burned by combined cycle plants “until December” must be approved by the European Commission and will have “a very significant impact. And on the automatic CPI ”and the current price escalation, said Ignacio Conde-Ruiz, UCM professor and deputy director of Fedea.

All the most optimistic scenarios will explode if it is decided to cut off gas supplies from Russia, which is on the table.

Exactly energy prices (around 70% of headline inflation) explain the difference in inflation between Spain and the rest of Europe. Overall, the Eurozone CPI accelerated by 7.5% year-on-year in March. The difference of 2.3 percentage points is explained by the partial calculation [se explica en este artículo] Electricity from INE (includes only free market and not regulated, which is less volatile) and due to the impact of the transport strike.

The climb has been around for a year and the base effect

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.

In April 2021 it has already jumped to 2.2%, in May to 2.7%, as well as in June last year. This means that the data for the coming months of 2022 already start with high inflation rates that continued to grow in the second half of the year, especially with the first energy peaks slowing down this year in relative terms, respectively. Forecasts by experts and the government.

Record after the oil crisis

With a monthly variation, compared to February of this year, inflation in Spain increased the rate 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. “A reasonable rate, however, will grow by the end of the summer and place its annual average of 3.5%,” they say, affecting Funcas.