Compared to the previous month, inflation has been slowing down in Spain. The inflation rate in November stood at 6.8% compared to 6.6% in October. Compared to the Eurozone, the inflation rate in Spain was 0.1% lower, while the inflation rate in the Eurozone was 0.5% higher.
Consumer price index rises 6.8% year-over-year in November
Compared to the same month a year ago, the Spanish Consumer Price Index rose 6.8 percent in November. This was the largest increase in the Consumer Price Index since the period ending June 1982. The increase was driven by a strong increase in the weight of hospitality. This is due to the weight of hotel stays and food, which are higher in the inflation basket than other goods.
The Spanish CPI grew at a faster rate than the European Union-harmonised CPI, but at a slower rate than the US CPI, which rose 6.8 percent in November. This was due to Spain’s unique inflation rates, which are driven by a high weight of food and hospitality.
Spain’s inflation rate eased in October, as lower fuel prices and electricity prices offset the effects of higher energy prices. This was the first positive month for the CPI since September, when the price of gasoline fell to a four-year low. However, energy prices have been climbing since the beginning of the year. Despite this, the price of oil remains at four-plus decade highs.
Spain’s inflation rate has now fallen below the forecasts set by Reuters. The INE reported that producer prices fell in October, with the producer price index dropping to 26.1% from a high of 35.3% in September.
Spanish inflation was 7.3% in October, a slight decrease from the 8.2 percent recorded in September. However, the monthly inflation rate remains above the eurozone average, which is largely due to higher food and hospitality prices.
Unprocessed food prices remained stable in December 2017
During the last few months of the year, unprocessed food prices have remained stable. While this might be a good time to stock up on canned goods, there is little reason to do so if the budget is not an issue. In fact, many unprocessed foods have been relegated to the back of the fridge for good reason. Despite this, the health benefits of whole foods continue to outweigh their less than stellar taste profiles.
For this reason, it makes sense to stock up on the best of the bunch from time to time. For instance, if you are in the market for a new kitchen cabinet, consider installing one that enables you to access your food from the ceiling.
Fuels and lubricants
During the first half of the year, the Spanish economy was in an expansionary phase. However, it is now in a phase of slower growth. This is reflected in the decline in producer prices. The INE announced that producer prices fell in October.
The main driver of inflation in Spain is energy costs. The government introduced a wide variety of support measures to address the high level of energy inflation. These include a fuel subsidy, a reduction in the VAT on electricity and gas, and a levy on windfall gains made by energy companies. However, these measures only have a modest effect.
The price of energy is still above the eurozone average. The rise in energy costs is feeding into producer prices. Higher energy costs are also fuelling input costs for manufacturers.
However, rising fuel prices in the EU are not as sharp as those in the United States. Fuel prices in the EU range from -20% to +20% annually.
Fuel prices in the EU have been extremely volatile over the last two decades. The price of gas in the EU has also been rising. This is primarily due to shortages of gas and a shortage of liquefied natural gas.
In addition to the fuel price subsidy, the government has introduced a wide variety of support measures to put a lid on inflation. These measures include a reduction in the VAT on electricity and electricity taxes, a levy on windfall gains by energy companies, and a gas price cap. These measures have been approved by Brussels and Madrid. They are designed to reduce inflation by 1.4 percentage points.
Economic expansion is set to decelerate in 2023
Earlier this week the Organization for Economic Co-operation and Development (OECD) released its latest Economic Outlook. This forecast indicates that economic growth in the United States is expected to slow down and growth in other advanced economies is expected to decline. The forecast also shows that global economic growth is expected to decelerate from 3.1 percent this year to 2.2 percent in 2023.
The Organization for Economic Co-operation and Development’s (OECD) economic forecast for the world is bleak. It estimates that the global economy will grow 2.2% in 2023, 0.1 percentage points below the growth rate in last year’s report.
This is due to a number of factors. One key factor is the U.S.’s persistent inflation. The HICP index is forecast to peak in the autumn of 2022, and then drop gradually over the forecast horizon.
The world’s largest investment banks also expect the global economy to slow down, a factor that will likely temper the pace of interest rate hikes. The Bank of England is expected to end its rate hikes in early 2024.
The United Kingdom’s economy is expected to decline in 2023 by 1.5%, while the U.S. economy is expected to grow by 0.5 percent.
The OECD forecasts that growth will slow in Asia, which will be the largest contributor to world growth in 2023 and 2024. Growth in Asia is forecast to slow down from 4.1 percent this year to 3.2 percent in 2023, with emerging markets accounting for close to three-quarters of the growth in 2023.
Bank loans to households and non-financial corporations increase
HICP inflation in Spain reached 6.8% in November, the lowest in four months. Despite the decline, the inflation rate in Spain is still at a high level. The country is facing its most serious cost of living crisis in decades.
The HICPX index rose to 4.8% in September, up from 3.8% in August. It is driven by price pressures across more sectors, including energy, food, and services. The HICPX index contributed around a third of overall inflation.
High inflation has been weighing on real incomes since the beginning of the year. As a result, spending is slowing. Meanwhile, households are using their savings to pay for rising prices. However, the Governing Council is working to ensure that inflation is returned to the medium-term target in a timely manner.
The unemployment rate in the euro area dropped to 7.9% in December, the lowest in nearly four years. However, the labour market remains tight. Workers demand higher wages. In the meantime, the gap between the effective inflation rate for low and high income households is the widest in over a decade.
Bank lending to firms has continued to grow at a solid rate, supported by working capital needs and growing inventories. However, lending to households is moderating, mainly due to the higher cost of borrowing.
The ECB Governing Council is working to ensure that the economy continues to grow in a sustainable way, while also reducing support for demand. The central bank has not changed policy rates since November. However, the Governing Council is ready to raise key interest rates further if inflation continues to rise above the ECB’s target.
Inflation differential in favour of Spain over the Eurozone
During the last two weeks, the Spanish inflation rate has dropped from 9.0% to 6.5%. This is the lowest 12-month inflation rate in Spain since May 2022. The Spanish Finance Minister hoped the downward trend would continue.
The Spanish economy is known for its service orientation. The tertiary sector is known to be labor-intensive. A major advantage of Spain’s low cost labor force is that it’s relatively immune to the business cycle. The country’s inflation rates have also been driven by a massive price hike for electricity.
Similarly, the European Central Bank is considering raising interest rates again in September. The euro has become more expensive as a result. Several countries in the eurozone have seen their inflation rates rise.
The Spanish economy has also been plagued by a variety of price and wage rigidities. The best way to tackle these is to enact monetary policy that helps to reduce prices. The European Central Bank has already taken the first steps in this direction. The Bank of Spain’s inflation forecast for the coming year is 8.7%.
The Spanish economy has also seen significant changes since the late 1970s. This is due to the intensification of Spanish integration in the core of the European Union. The Eurozone has seen the most notable rise in inflation rates since its inception. Its largest importers have seen their prices rise. This is a problem for smaller members of the eurozone.