The price of food rose on average 13.8% in August, its highest level since the beginning of the series prepared by the National Institute of Statistics (INE), which starts in 1994. The rise in the price of the shopping basket is worrying because in the case of the most vulnerable households, this component has a greater weight in their total consumption than in families with higher incomes. To protect them, economists and representatives of the production chain are in favor of some type of direct transfer or check to consume foodunderstanding that it would be a more efficient type of help.
It is not easy, since the State does not have these families well located, as experience with the Minimum Living Income. There are those who had access to it but have not requested it due to ignorance, bureaucratic problems, Internet access or because they are trying to survive in the underground economy and are afraid of being ‘detected’. According to the latest Active Population Survey, the one for the second quarter, in Spain there are around a million families with all their households unemployed. And there are also those who do not even reach the minimum income to have to file the income tax return. However, the State knows little more about the collective.
An aid to the most vulnerable families and households that does not interrupt the rules of the game would be a measure that would have the best effects from the economic point of view, as explained in ‘Information‘ Pedro Barato, president of Asaja (the Agrarian Association of Young Farmers). From his point of view, society was used to consuming food at a very low price, which was leaving producers with practically no margins or losing money, especially as a result of the very strong increase in production costs that the crisis brought with it. energy aggravated by the war in Ukraine.
The light has risen 300%, the price of fertilizers has multiplied by three or four (from 240 or 250 euros per ton to around 750) and labor has become another 40% more expensive. “We are not causing inflation. The issue of margins has worsened and we will see what happens with the crops from next month,” he says. The weight that the cost of fuel, transport and other components, such as fertilizers and feed, have in the agricultural sector, leads María Jesús Fernández, senior economist at Funcas, not to rule out that the coming months we may see even higher inflation rates in the case of food -before they begin to fall, as is expected to happen with the general rate in the final stretch of the year-.
At the proposal of the second vice president, Yolanda Díaz, of limit the prices of a basket of basic products experts see more shadows than lights. José Emilio Boscá, associate researcher at Fedea, explains to this newspaper that he is not in favor of an experiment of this type, unless there is a real problem of concentration, in which case it would be necessary to go directly to the regulator to correct it. The big distributors can lower prices but it is not known if their margin is increasing or not, if they are pulling the rest of the chain, he points out.
Has inflation peaked?
Another question in the air is whether inflation could have peaked as early as July, when the year-on-year rate climbed to 10.8%. Camilo Ulloa, Principal Economist of the Spain and Portugal unit at BBVA Research, acknowledges that he was surprised by the data for August (prices rose 10.5% year-on-year), taking into account the scenario they handled at the beginning of the summer. They expected a cut in Russian gas exports, but not that it would have such a large impact on prices.
The positive part, as detailed in this medium, is that the GDP deflatorwhich is the best measure of domestic inflation, shows rates significantly lower than what consumers are bearing. Thus, from his point of view, business margins at the national level are helping to contain prices. If everything remained as it is now, there would be a progressive slowdown in inflation. However, “the loss of purchasing power would continue because it is unlikely that next year we will see a fall in prices,” he advances. This rigidity in the drop in prices was evident at the worst moment of the pandemic, when despite the confinements and the halt in activity, only the price of fuel fell.
María Jesús Fernández also trusts that the general rate will have peaked in July. The price of oil is trading below 100 dollars, other raw materials that had become much more expensive in 2021 or since the start of the war have moderated their price, as has also happened with maritime transport, and the demand dammed up in 2020 and 2021 can be considered sold out this summer. The economic context will be one of stagnation or recession and with the increase in rates, demand will relax. However, from Funcas they consider that the core (which excludes energy and fresh food) still has room to rise for production costs. They thus place average inflation at around 9 or 9.1% for this year and estimate that the rate will end December at 8.6%. Next year the average will drop to 4.8%.
Faced with a context like this, José Emilio Boscá recalls the need to reach an income agreement. And this, despite the fact that “there is no indication that a spiral of prices, wages and margins is taking place, but rather the opposite,” he points out. The GDP deflator shows how domestic prices have not yet been contaminated by inflation -in fact, it has fallen in the last three quarters-. This indicates that there is no spiral, so in his opinion it would be desirable for companies not to try to raise their margins or workers their wages beyond what is reasonable. “It is important that the government take the lead in this area,” he says. He also stresses that agreements can be reached for a reasonable period of time, for a couple of years or three, with review clauses. This income agreement should also include, in his opinion, pensioners.