3% inflation in one month we haven’t seen it for 20 years, now all the alarms for Spain are on

Yesterday the advance inflation data for the month of March was published. And it was a very, very bad fact that leaves a very dangerous feeling of lack of control. The year-on-year rate of inflation was 9.8%the highest level since 1985, 37 years ago.

In fact, the interannual rate has increased 2.2 points in a single month, something that has not been seen since 1977, 45 years ago. We are talking about times of economic lack of control and this may be what we are heading for.

The monthly rate is spectacular

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In addition to all this, the monthly rate has been 3%. In other words, prices rose in a single month what they should have risen in a year and a half if inflation were under control. This has not happened since 2002, 20 years ago, but the measurement methodology was different.

This monthly rate indicates that we are not dealing with a simple base effect. When the previous year’s inflation has been very low or negative, a small rebound in prices can leave year-on-year inflation rates very high. But the truth is that we are seeing inflation month by month and therefore there are no excuses: the alarms for Spain are on.

Energy and unprocessed food

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The blame for this rate is mainly due to increases in energy prices and unprocessed food. But we can’t neglect the subjacent inflation rate that already touches 3.4%.

A shock plan is urgent to contain prices, because the biggest problem with inflation is that if economic agents assume that there is inflation, they decide to raise prices and make decisions with this scenario in mind, causing a price rise spiral that is difficult to get out of.

Inflation in other European countries

The truth is the phenomenon of inflation that we are seeing is not exclusive to Spain. But it is also true that we are in the group of the worst countries that are doing it. Spain is one of the countries to publish the leading indicator first, but the February data already placed us in the bottom group (with 7.6% year-on-year inflation), along with Eastern European countries, Luxembourg and Belgium, but far from France (4.2%), Germany (5.5%), Italy (6.2%) or even our neighbor Portugal (4.4%).

They are all very high values ​​and we hope that, apart from the measures that are going to be taken in Spain to contain these prices, we will have some measure in Europe to contain this inflation that does not only imply a rate hike that could weigh down the recovery.


Source: El Blog Salmón by www.elblogsalmon.com.

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