Inflation ended its positive streak in February. According to the data released this Friday by the National Statistics Institute (INE), prices stood at 2.3%, the same level as in January, putting an end to three months of reductions that have brought the CPI closer to the European Central Bank’s objective, but which have not served for now to place it at the desired threshold of 2%. Core inflation, which excludes energy and unprocessed food, increased by one tenth, to 2.7%.
In the absence of the INE providing more details, energy has been the protagonist, for better and for worse, of the February data: electricity contributed favorably by becoming cheaper, but fuel rose, as did restaurant and food prices. The Ministry of Economy has highlighted in a statement that Spain continues on the path of getting closer to the ECB’s objective, and has pointed out that the moderation of recent times “favors that, allowing families to gain purchasing power.”
The recent positive trend, however, will be difficult to maintain in March due to the base effect. Last year, prices fell sharply in that month because electricity rates sank, so when prices are compared with that month for the calculation of inflation, there are many options for a rebound.
Although the figures are already very close to the ECB’s objective, and in the euro zone as a whole – in January it was 1.7%, which opens a negative competitiveness gap for Spain compared to companies from other countries on the continent – from Frankfurt they are aware that price increases have not ceased to be a problem for consumers.
However, in the opinion of the president of the institution, Christine Lagarde, citizens tend to magnify it, and perceive a rise in inflation because they base their perceptions on their personal consumption patterns, especially on their food purchases, which are becoming cheaper more slowly than other items, instead of taking into account all expenses. The shopping basket is precisely one of the elements that is preventing Spanish inflation from catching up with European inflation. It is still not known exactly what happened in February, but in January food and non-alcoholic beverages rose at a strong year-on-year rate of 3%.
Another factor that does not contribute to feeling that the improvement in inflation data results in a recovery of purchasing power is the increase in housing prices. He recently discussed whether it should be incorporated into the CPI and has proposed an index that includes it so that the statistics are more faithful to reality, but for now that possibility is not on the table.
Although inflation is not far from normalization, the CPI has been above 2% for 16 months. And the fatigue comes from further back: in the last five years, Spanish inflation has only been below 2% for four months. In that time it accumulates an increase of more than 23%. Broadening the focus further, in the last 30 years, since 1996, before Spain joined the euro, prices have doubled.
