Inflation climbs to 4.1% and food moderates although it is still 12.9% more expensive than a year ago

Inflation picked up again in April to 4.1% year-on-year, leaving behind the respite it had registered in March, fluctuations, however, that are due to comparison with the first turbulent months of the war in Ukraine. In monthly terms, prices in Spain grew another 0.6% in April compared to March and food, the main concern of families, moderated in the interannual rate to 12.9% (in March it had been 16.5% more expensive than in the same month of the previous year), but in the monthly rate they registered a new increase of 0.3%.

As confirmed by the National Institute of Statistics (INE) this Friday, underlying inflation, which measures the evolution of the prices of all consumer goods and services with the exception of energy products and fresh food, stood at 6, 6% year-on-year in April, thus moderating from the 7.5% registered the previous year. In the monthly rate, however, it rose again by 1%.

Despite the fact that both rates are moderating, they are still very high compared to the healthy level of 2% price increases stipulated by the European Central Bank (ECB) and, given that Spain is one of the euro area countries with the lowest level of inflation, it is foreseeable that the institution chaired by Christine Lagarde will raise interest rates another 0.25 points in June and keep them at that level until well into 2024, with the risk of approving new increases if inflation does not ease.

These increases in interest rates will have a full impact on families and companies, so even if they see how prices slow down (they continue to rise, but less and less), the lower disposable income due to the increase in the cost of their debts (credits, mortgages, etc.) will translate into less dynamism in consumption from the second half of the year, according to experts.

With the CPI rising 4.1% in April, inflation so far this year stands at an average of 4.8%, almost half that of last year, when it registered an average rise of 8.4% in year. However, although this moderation is good news, it must be borne in mind that the price increase registered in 2023 occurs on top of prices that already rose significantly last year, thus producing a cumulative effect.. Even if inflation moderates to 2%, prices will not drop at any point in this disinflationary process.

Even so, the Ministry of Economy has celebrated the data published this Friday: “Spain remains among the countries with the lowest inflation in the European Union, which is favoring the competitiveness of Spanish companies, as evidenced by the share gains of market and the increase in exports of goods and services, even in the complex international economic context. The set of measures adopted last December will continue to help dampen the evolution of inflation,” they promise.

Food, still what rises the most

Despite the fact that the shopping basket is no longer as expensive compared to a year ago as it was last month, in practice families found prices 0.3% higher in the supermarket in April when they went shopping and, of everything they consumed (including energy, transportation, clothing, etc.), some foods continued to show the highest price increases compared to the previous year.

Sugar is today in Spain 49.6% more expensive than in April 2022; butter has risen 31.2%; milk almost 28% (27.7% whole and 27.5% skimmed); sauces have become more expensive by 26.3%; baby food, 23.3%; and rice, 23%.

Food did not stop climbing in April, since it was 0.3% more expensive than in March, but it is true that the rate of increase dropped considerably, since in March it had increased by 1% in just one month and in February, 2.2%.

This lower monthly increase is due to the fact that some foods fell and offset the rise in others. Specifically, fresh fruits were 4.4% cheaper than in the previous month; legumes fell by 2.6%; and butter fell 0.9% compared to March.

Tourism drives prices for Easter

What rose the most in price in Spain last month was not the shopping basket, but rather the fact that when Holy Week took place there was a sharp rise in the prices of tourist services. Hotels became more expensive by 17.2% in a single month; tourist packages, 13.7%; other tourist accommodation increased in price by 6.2% compared to March; and holiday centers, campsites and hostels became more expensive by 5.7%.

In addition, the premature arrival of the heat led to a change in the wardrobe of the Spanish and the change in the collection in the stores also brought with it a rise in the prices of clothing: 13.7% in baby clothing; 8.6% in women's clothing; 7.1% in children's footwear; 5.4% in women's footwear, and 4.9% and 4.8%, respectively, in men's clothing and shoes.

Supplies and transportation, the lowest

If we compare the prices we have today in Spain with those we had a year ago, we can see that suburban transport is 47.7% cheaper than then -due to the approved discount measures in public transport-; electricity costs us 36.2% less; transport by bus is 25% cheaper and by metro, 24.2%; butane costs 9.8% less; diesel has fallen by 7%; and natural gas, 6.9%.

Gasoline is indeed more expensive than it was a year ago, but its price has moderated and now costs (only) 3.2% more.