Over the past five months, the CPI rate has fallen by five percentage points, falling below last year and hitting its lowest level this year, but annual core inflation is the highest since 1992
Inflation continued to fall in the last month of the year, ending the year at 5.8%, one percentage point lower than in November and lower than 2021 (6.5%), according to the National Institute of Health’s leading indicator. Statistics (INE) And which has recorded double-digit numbers in the summer months this year, almost 11%. Since August, however, the CPI has fallen steadily, by five percentage points in five months. The rate of 5.8% is the lowest since November 2021.
This evolution over the past month is due to the fact that electricity prices rise less than in December 2021 and that fuels show a stronger fall than last year. In the opposite direction, clothing and footwear, whose prices are falling, but less than in December 2021, stand out, and the rise in the prices of tobacco and processed food.
Despite this reduction in the overall index, underlying inflation (not counting unprocessed food or energy products) rose by six-tenths, to 6.9% year-on-year. This is the highest level of core inflation by the end of the year since 1992, the year of the Expo and the Barcelona Olympics, when it stood at 6.8% in December (7.0% in November 1992). The underlying had not been above the overall index since February 2021, although levels were then much lower than they are today. In December, the core index outperformed the general index by 1.1 points, the biggest difference since October 2020.
The reduction in inflation has been helped by the measures approved by the government, such as the cap on the price of gas for electricity generation, rents and the 20 cent subsidy on fuel. This week it limited fuel subsidies to carriers, farmers, fishermen and shipping companies, and cut VAT on some foods.
Despite this reduction in inflation, wages rise by less than half in the signed collective agreements (2.69% wages against 5.8% prices), causing workers to lose purchasing power.
In 2020, with the pandemic, we had negative inflation, reaching -0.9% year-over-year in May. However, with the end of activity restrictions due to the coronavirus, demand recovered faster than supply and this caused the resulting price increases. Inflation started to rise in January 2021 and reached high levels from the summer (3.3% in August, 4% in September), reaching double digits in June this year (10.2%, then 10.8% in July and 10.5% in August). The war in Ukraine, with the rise in the cost of energy, food and transportation, accelerated the rise in prices. Inflation started to fall from August, although it was still at 10.5% at the end of the summer.
One of the main concerns for families this year has been the price of electricity and gas. The index grouping the energy components of the CPI increased by 28.7% in 2022 (with data up to November, pending publication by the INE of the CPI broken down by groups) after increasing by 21.2% in 2021 have become. According to Funcas, there have been abrupt increases since the oil crisis of the 1970s. The electricity bill has been the main factor behind the outbreak of energy inflation. Fuels have also followed an upward trend, but less markedly, unlike the oil crisis of the 1970s.
Given the high weight of these components in the overall CPI, Funcas estimates that the increase in the energy CPI directly explains about 41% of the overall inflation recorded in 2022. This is without taking into account the indirect impact on other prices, especially with regard to transport, fertilizer (and therefore agricultural production) and the electro-intensive industry.
The energy CPI is also notable for its high volatility. The index accelerated its rise after the invasion of Ukraine: given the collapse of Russian gas exports and the threat of supply disruptions, the price of the material skyrocketed, putting strong pressure on electricity markets. In March, the CPI for energy increased by 60.9% year on year, the highest value in the historical series after the absolute maximum reached in 1980. demand moderation, the introduction of a cap on the price of gas used for electricity generation and the diversification of sources of supply.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
