Rising energy prices have pushed inflation to 29-year highs. The CPI rose 5.5% year-on-year in September , which will take the indicator to be above 5% at the end of the year, well above the forecasts of the main analysts at the beginning of 2021. According to analysts, , the mismatch in prices will be “very difficult” to correct in the short term.
“The published inflation data is very worrying because it consolidates a level of inflation that is difficult to reverse in the short term, especially when core inflation has experienced a qualitative jump, reaching 1.4%,” says economist Javier Santacruz.
“I think it has not yet reached a ceiling, energy prices continue to rise , and now there will be a delayed rise in both products and services. For example, the regulated tariffs that until now have held up without rising and that now no longer increase. there is no choice but to go up to avoid significant losses in their income statements, “he adds.
For his part, Diego Sánchez de la Cruz, director of the Intelligent Regulation Forum (FRI), highlights that the advance of inflation will cost families and companies 30,000 million euros this year. “The upward trend in prices is not only going to continue, it is going to increase in the coming months, ” says the economist.
In his opinion, the energy problem and the problems in the supply chain “are already hitting consumers and companies.” However, Sánchez de la Cruz highlights “the adaptability of companies, which are not losing more foreign competitiveness than that of their partners due to their great capacity to adapt. In any case, the specialist warns that” it is very worrying what what’s going on”.
The advance in prices has struck down the forecasts of analysts, who had predicted a rise in the general CPI of 4.8%. Prices had advanced 4% in September. On the other hand, the monthly rise in prices has been 2%, a very high rate that has not been seen since 1986 (prices have advanced 2% in a single month).
Has the energy peaked?
The INE reports that within this behavior the increases in the prices of electricity and, to a lesser extent, fuels and lubricants for personal vehicles and gas stand out, compared to the decreases registered in October last year.
For its part, the estimated annual variation rate of core inflation -general index excluding non-processed food and energy products- increased four tenths to 1.4% , which is more than four points below that of the CPI general. This is the highest difference between the two rates since the beginning of the series, in August 1986.
However, the prices of some energy products, specifically gas, have broken trends in recent days. On Wednesday, Russian President Vladimir Putin ordered Gazprom , the Russian energy company, to increase gas pumping next month to refill European reserves. The price of gas futures contracts fell by up to 9% , falling to levels of a month ago, after Putin’s new intervention on the supply of Russian gas.
The president gave the order to the head of Grazprom on a television basis to increase gas inventories at its facilities in Germany and Austria from November 8, once Russian reserves have reached their maximum level to face the winter.”We will have a more favorable situation in the European energy market,” he said on the televised scene.
The Harmonized Consumer Price Index placed its interannual rate at 5.5%
Although it is true that the general CPI is setting historical variation rates , it is necessary to give some context to the situation. This increase in inflation is due in large part to what is known as the base effect, since today’s prices are compared to those of a year ago.
In October 2020, the CPI fell 0.9%, dragged down by the Covid-19 crisis , which generated an unparalleled recession in peacetime, depressing demand and dropping the price of raw materials (oil, gas. ..). Now, the strength of the global economic recovery is generating the opposite effect.
On the other hand, the Harmonized Consumer Price Index (the one used by Brussels to compare the inflation rates of the different countries with a homogeneous basket) placed its interannual rate at 5.5% , which is 1.5 points more than the one registered the previous month. For its part, the leading indicator of the IPCA rose 1.7% in monthly rate. This data is provisional and the INE will publish the final data for October on November 12.