Prices rose 7.6% in February in Spain compared to last year, their biggest rise since December 1986, as reported this Friday by the National Institute of Statistics (INE), which corrects the figure for two tenths upwards. weeks. The rise in inflation, driven by higher fuel, electricity and food prices, leaves the 6.1% increase in January far behind, increases the pressure on consumers’ pockets, and threatens to continue to do so: the The data only includes five days of the Russian invasion of Ukraine, which began in the early hours of February 24. Since then, both oil and gas have become more expensive at a dizzying pace on international markets due to sanctions on Moscow.
Among the products most hit by the gale of increases are electricity (80.5%), gasoline (25.1%) and diesel (28.4%). Last month was the third month with the most expensive electricity in history —slightly above 200 euros per megawatt hour on average—, while fuels have risen steadily since the week of December 20 and now exceed two euros per liter at some service stations. Among foodstuffs, the increases in olive oil (30.6%), other edible oils (32.3%), pasta (19.9%) and baby food (10.5%) stand out. Core inflation, which discounts the evolution of the most volatile components, such as energy or food, rose six tenths to 3%.
The outlook for March predicted a decline in inflation due to the favorable effect of the comparison with the same month last year, when there were already increases in electricity and fuel, but this scenario has been buried by the war. As columns of Russian soldiers devastate Ukraine and peace negotiations fail, vetoes against Russia, one of the world’s largest oil and gas producers, are proliferating. A look at the prices shows that its ceiling now seems further away: electricity has pulverized its all-time highs in March, reaching 545 euros per megawatt hour in the wholesale market, and fuels have chained six weeks at record levels.
The long waits at the cheapest gas stations, the rationing of sunflower oil -very dependent on Ukrainian production- in supermarkets, the threat of closure in the industries that use electricity more intensively or the decision of many fishermen not to go out to fish by skyrocketing fuel prices have become the most visible part of a problem that has other less obvious but equally disturbing faces, such as that of precarious households that forgo certain expenses in order not to get out of a tight budget, which He had extra costs when paying the electricity bill, filling the deposit and filling the shopping basket.
The phenomenon has conflicting economic effects. On the one hand, it improves the fiscal collection of the Administrations, which enter more in taxes, and contributes to diluting the enormous public debt of the countries of southern Europe. But after eleven months above the level of 2% recommended by the European Central Bank, its negative consequences weigh much more: inflation undermines the purchasing power of citizens, devours savings, and being closely linked to the increase in the price of energy, transfers wealth from countries that import gas and oil —in the case of Spain— to those that export it, with clear effects on economic growth: the extra money that goes to cover basic needs such as paying for electricity, putting gasoline and doing the purchase is no longer used for dining in a restaurant or renovating the wardrobe.
He knows in depth all the sides of the coin.
The foreign ministries fear more and more the political erosion linked to the rise in the cost of living. And the distribution of blame is gaining ground in the debate. The president of the United States, Joe Biden, is trying to associate the enormous inflation – this Thursday it was known that it was 7.9% in February – to the name of Vladimir Putin, and the Democrats have started a campaign on social networks with the hashtag #PutinPriceHike — Putin’s price hike. In Europe, the battle is being waged in Brussels, where the Spanish government is pressing to establish caps on the price of electricity. On the domestic front, the Executive has undertaken a reduction in electricity taxes without which inflation would have been nine tenths higher in February, 8.5%.
Even the European Central Bank, which for months has repeatedly repeated the mantra of the transitory nature of inflation, has had to back down. This Thursday it raised its average inflation forecast for the euro zone in 2022 from the 3.2% it predicted in December to 5.1%, and announced that it will accelerate the withdrawal of stimuli. One of Frankfurt’s concerns is that price increases are transferred to wages and cause an inflationary spiral, although its president, Christine Lagarde, explained on Thursday that they have not yet detected this contagion. In Spain, the unions asked at the beginning of this month for 5% salary increases to compensate for the loss of purchasing power of the workers, but the employers’ association CEOE rejects the proposal.