Inflation Shoots up to 5.5% in Spain and Hits Highs not Seen Since 1992

Inflation has taken a further step in Spain to stand at 5.5% per year in October, the highest since September 1992, as published by the National Institute of Statistics (INE). Prices continue to advance due to the rise in raw materials prices, which is causing a boom in the energy tariff paid by households and companies, but also in the transport used to carry all goods to their final destinations. In turn, interruptions in global supply chains are generating a certain shortage of some inputs that push up national prices through imports.

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).

The INE reports that within this behavior the increases in electricity prices and, to a lesser extent, fuels and lubricants for personal vehicles and gas stand out, compared to the decreases registered in October last year.

Although it is true that the general CPI is setting historical variation rates, we must 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.

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.

Some financial organizations, such as Funcas, had already warned that inflation could reach 5% during the final part of the year. However, within these forecasts, a boom was not predicted so fierce, nor so early, since the peak of inflation was expected to arrive in November.

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 HICP rose 1.7% in monthly rate.

In spite of everything, it is important to bear in mind that this data is provisional (although it is usually very accurate) and that the INE will publish the final CPI data for October on November 12.