Inflation in April stood at an annual rate of 8.4%, after a slight drop in the consumer price index (CPI) in April compared to March of 0.1%, according to the leading indicator of the National Institute of Statistics (INE). This evolution represents a significant drop compared to the 9.8% in March, the month in which the general level of prices could have peaked, although it remains at the highest levels in more than three decades.
In any case, the rise in prices has infected the economy as a whole, since the Underlying inflationwhich excludes the most volatile variables such as energy or unprocessed food, rose one point in April to 4.4%, the highest level since December 1995, if confirmed in mid-May by the INE, when the final data for the month will be published.
Light and fuel
The decline in the general rate was due to a certain moderation in electricity and fuel prices compared to the records registered in March. On the other hand, the prices of food and non-alcoholic beverages stand out, with a greater increase this month than in April 2021, according to the INE.
Last month, the year-on-year rate of inflation reached 9.8%, the highest level in almost 40 years. The Energy was once again one of the variables that pulled prices the most, but also food.
What began as a period dominated by very high energy prices has spread to the economy as a whole, as reflected in the Underlying inflation.
This evolution, which subtracts purchasing power from family income and savings, has strained the relationship between employers and unionswhich require adjusting the wages at the cost of living. That makes it difficult rent agreement that the Executive promotes not only to moderate the rise in wages but also that of margins and business profits.
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The effect is also noticeable in rentals, which are usually linked to the annual CPI. For this reason, the Government has forced in the shock plan to alleviate the effects of the war, which Congress must validate this Thursday, a limit of 2% on the rise in rents.
It also means a high extra cost in the pensions, which are revised according to the CPI and for this year were set at 2.5%. Forecasts for this year are not very encouraging. The Bank of Spain calculates that average inflation in 2022 will be 7.5%; the Independent Authority for Fiscal Responsibility (Airef), 6.2% and the International Monetary Fund (IMF), 5.3%. The extra cost is calculated at up to 13,500 million euros (the monthly payroll is close to 11,000 million), as a result of the difference between the increase for 2022, of 2.5%; and the average inflation in which the year will end.