The year started with the rise of one tenth of inflation in January, which stood at 5.8% in its interannual rate. In this way, after five consecutive months of falling prices, this rise of one tenth occurs. One of the reasons for the rise is that January is the first month in which the withdrawal of the general bonus of 20 cents is applied to the price of fuel, which now only applies to the transport sector, which has pushed prices up .
Also since January 1, the VAT reduction on basic foods has entered into force, which will foreseeably have lowered prices.
On the other hand, core inflation continues to rise, this time by half a point, reaching 7.5%, according to advance data published this morning by the National Statistics Institute (INE). It represents his highest level since December 1986, and also a difference with the general of 1.7 points. Core inflation, which does not take into account energy or fresh food and is considered less volatile, already exceeded the general index in December and everything indicates that it will remain above it for some months.
From the Ministry of Economy they indicate that they expect underlying inflation "to reach its maximum in the first quarter and follow the downward path of general inflation and the costs of energy and other raw materials".
María Jesús Fernández, from Funcas, also indicates that for the moment the subaccent will remain high. "Core inflation is worrying and will remain high for at least the first three months of the year...we expect it to come down but it will be very slowly and food will continue to get more expensive for now." For his part, Oriol Aspachs, from CaixaBank Research, considers that "the negative surprise is core inflation, which rises more than we expected."
One of the difficulties in interpreting the data published today is that they introduce new weights in the basket to calculate the CPI, and the methodology for accounting for electricity and gas prices has also been modified, where market consumers have been incorporated free. This last point is especially significant, because until now, since these consumers, who account for two thirds of the total and who are the ones with the most stable prices, have not been included, reality has not been accurately reflected. The impact of energy on the CPI was overestimated at the beginning of the year and underestimated in the second half. A modification that comes a year later than expected, according to the INE because they did not have sufficient detailed information to incorporate these contracts into the measurement.
Maria Jesús Fernández believes that "the rise in inflation has had to do with the change in the weighting of the shopping basket." According to Funcas's calculations, with the old ones the result would have been lower inflation, 5.3% overall, and 6.9% underlying.
In the new weighting, for example, food will weigh less, it will go from accounting for 22.6% of the total shopping basket to 19.6%. Instead, alcoholic beverages and tobacco weigh more. Some changes made with the support of Eurostat, the statistical office of the EU, according to the INE.
This one-tenth increase in the CPI for January is influenced by the increase in fuel prices, compared to January of last year, and also by a smaller decrease in the prices of clothing and footwear. Instead, they have pushed down electricity prices.
In 2022, inflation managed to slow down in the second part of the year. It peaked in July when it was close to 11% and then gradually moderated to 5.7% in December, and now at 5.8%. The reasons must be found in the reduction in the price of oil, gas and raw materials, in addition to an improvement in the resolution of bottlenecks in supply chains.
Instead, food prices have skyrocketed in recent months, up 15.7% last month. Here, the staple was the rise in processed foods, which pushed up the food mix. That is why, since January 1, the VAT on basic foods has been reduced
However, we have now had core inflation for three months, which does not take into account fresh food or energy, above the general CPI. And everything indicates that it will continue at high levels for a few more months this year.
The data released last week on growth and the labor market during 2022 were very positive for the year as a whole, but with a significant slowdown in the final stretch of the year. With regard to GDP, although it increased by 5.5% in 2022, in the last semester it was practically flat. The recession was avoided, but with an increase of only two tenths each quarter, which raises questions for this year.
