Inflation has fallen to 3.3% in March, but it is a decline that has much more of a statistical effect than a real moderation of the rise in prices this month. The year-on-year CPI is drastically reduced, from 6% in February to 3.3% in March, but this does not mean that prices have fallen.
The key is that interannual inflation is calculated by comparing the CPI of the month in question with that of the same month of the previous year and in this case, in March 2022 the war in Ukraine had a full impact and with it, the escalation of the price of energy. In March of last year, inflation was close to 10%, with which, when compared with the current rate, the so-called base effect kicks in, and the year-on-year CPI is reduced to 3.3%.
In the coming months, this effect will be especially significant. An analysis by CaixaBank Research, carried out by Oriol Carreras and Javier Ibáñez, reported by La Vanguardia, points out that "the base effect will exert significant downward pressure on inflation throughout the first half of 2023" and shows the variation in the impact of this effect base, which will be very pronounced in March and June, and less so in April and May.
Everything depends to a large extent on what happened in these months last year. For example, the article calculates that even though the CPI level is expected to grow by 3.5% between January and June 2023, inflation will drop to 3% in June. If the index grows between January and June, how can inflation fall? Well, for the comparison with the CPI for the same month a year earlier, when it was 6.5%. This is what already happened in March.
The result is that the validity of the general CPI will be relative in the coming months. Not only in March, but throughout the year, especially in the first semester. This also explains the repeated statements by the First Vice President and Minister of Economy, Nadia Calviño, that in this first part of the year “high volatility” of inflation is expected given that the year-on-year rate will be compared to the most turbulent moments at the beginning. from the war.
The good behavior of electricity and fuel prices, which increased in March 2022 and decreased this month, have played in favor of reducing inflation. From the Ministry of Economy they emphasize that March inflation is the lowest since August 2021 and that it is almost three times lower than that registered a year earlier.
For its part, core inflation fell by one tenth compared to the previous month, standing at 7.5%. It is the first decline, albeit modest, of this type of inflation, which does not include energy or fresh food, since last September.
