Inflation is heading towards 5% at the end of the year after bottoming out in June
The general elections on July 23 were held in the sweetest month of the year for inflation, when the general CPI reached what will foreseeably be the lowest for the year: an interannual rise of 1.9%, even below the limit of 2% used by the ECB to delimit “healthy” inflation.
However, from now on inflation will resume its upward path: it has already risen to 2.3% in July, four tenths more, and the Funcas experts expect it to continue rising: up to 2.5% in August, the 3.5% in September, 4.1% in October, 4.7% in November and, to close the year, 5% in December.
This expected rise in inflation is not due to the fact that prices are now going to rise excessively, but rather is the result of a comparison with the evolution of prices that occurred last year, in which different episodes of 'step effect' will have an impact '.
This increase in the index in the second half of the year will go hand in hand with an expected slowdown in activity and will lead inflation to remain on average around 3.9% in 2023 as a whole, compared to the 8.4% registered on average last year.
The underlying, for its part, will remain entrenched at around 6% until it converges with the general at 5% at the end of the year.. Food will continue to be the products with the most pronounced rises, which could also be aggravated by the drought situation.
By 2024, both indices are expected to follow a similar trajectory and rise an average of 3% in the year. Inflation will thus slow down as the ECB's restrictive policy takes its toll on household consumption and business investment.
Although inflation has registered a significant decrease (at the beginning of the year it was around 6%), this does not mean that prices are going down, but only that what they rise is decreasing compared to last year: in February prices were 6.1% more higher than in February 2022 and are now 2.3% higher than in July of last year.
For this reason, prices have accumulated a 15% rise since the summer of 2019, the last one before the pandemic broke out, and this increase has caused the impoverishment of families, whose incomes have not increased in the same proportion.
The inflationary wave that hits Spain began to form in the second half of 2021, when the world was recovering strongly from the stoppage of the pandemic and there was a mismatch between the rate of recovery of demand and supply (production).. At that time and, with more force after the outbreak of the war in Ukraine in 2022, the inflation suffered by the country was mainly imported, due to the unprecedented rise in energy prices. However, the Iberian mechanism and the evolution of prices have allowed a relief in the price of energy, while the rise in production costs has spread to the entire economy, which in practice means that now Spain's inflation is internal, not from abroad.
This thesis is demonstrated by the fact that the GDP deflator, which measures production prices in the country and which last year remained systematically below inflation, was 6% in the second quarter of the year, while the CPI has risen an average of 3% in that period, half.