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Inflation slowed to 8.3% in April, but it hits low-income households the hardest.

Latest NewsInflation slowed to 8.3% in April, but it hits low-income households the hardest.

The pandemic could leave behind the normalization of mask use and a new perception of social conventions, such as greeting each other or the minimum distance to keep from each other. The high-inflation stage that Spain, like many other countries, has been going through for months is likely to leave a legacy of other habits, especially among those with fewer resources to weather the crisis. Gone are the days of carefully comparing prices at gas stations and supermarkets to decide where to fill up a tank or fill up a basket. They also don’t finish looking at the daily changes in electricity rates in order to put the washing machine on the cheapest clock.

For many families, these methods have become necessary to save as much as possible from the inflationary bonfire. And the fact is that price increases, although growing more slowly, are still high: the National Institute of Statistics (INE) announced this Friday that inflation in April was 8.3% compared to last year, which is a tenth less than predicted in his forecast. calculation two weeks ago.

The data is positive as it suggests a decline from 9.8% in March, the second time since February 2021 that it rotates from one month to the next. On the other hand, history will place them in the bad news archive. : after March, this is the period with the highest inflation in the last 35 years, and INE emphasizes that food and non-alcoholic beverages have become especially expensive, citing the increase in prices for staples such as meat, bread, cereals among them. , legumes and vegetables, milk, cheese and eggs, this month is higher than last April. Other essentials are also noticing this. Without exception, all products measured by INE have increased in price compared to April 2021: for example, olive oil has risen in price by 42.5%, pasta – by 25%, and fresh fruit – by 9.5%.

The second month of the war in Ukraine has brought a pause in a string of price increases, but the essential has not changed: the price of oil barely fell below $100 in April, which caused fuel to stay very close to its all-time highs this month, despite the fact that that the government softened the bill a bit by subsidizing a rebate of 20 cents per litre. In the case of electricity, the sensations were similar. Prices per megawatt-hour have been softened by the introduction of more renewable energy into the system and reduced consumption due to rising temperatures, but rates are still far from what is considered normal. Core inflation, which excludes fresh food or energy due to its volatility, rose one point to 4.4%, its highest level since 1995.

However, slowing down the price escalation could contribute to a change in trend, which, according to Calvinho, is very close. In an interview with this newspaper last week, he assured that the peak of inflation has already passed, and prices will fall in the second half of the year. The VP made it clear during her speech this Thursday at the European Funds Conference organized by elDiario.es that management is not happy with the current numbers. “This is an unacceptable level,” he said.

He thoroughly knows all sides of the coin.

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Meanwhile, its effects are especially felt in households with limited budgets. Food banks are predicting a 20 percent surge in demand for aid this year due to rising basket prices. That is, citizens who previously had the purchasing power to buy their own food have ceased to have it. And wages are lagging behind: inflation has risen four times more than wages in March.

Angel Talavera, chief European economist at Oxford Economics, said there is “no doubt” that inflation is disproportionately affecting lower incomes. “First, because they typically spend the majority of their income on food and energy, which is growing the most. In addition, these are items that are very difficult to replace – it is much easier to stop going on vacation or to the theater than it is to stop eating or heating the house. And finally, they have much less savings, which makes it harder to cover unexpected price increases,” he explains.

To this list, we must add the factor of housing: those with more resources usually own it and don’t have to pay rent – or face possible increases – for one less expense, freeing them up for additional savings that others have. no. This is when there is also the additional airbag of a property leased to a third party that provides a regular income. And your margin to avoid spending more, such as waiting a little longer than usual to change cars.

Inflation understands classes

A CaixaBank Research report titled “Inflation Really Understands Classes” is in line with this thesis. “It is often overlooked that the impact of price increases does not affect all households equally. The surge in essentials is having a greater impact on lower income groups,” he concludes.

The Brueghel think tank based in Brussels carried out the calculations. “If a given good represents 20% of the total expenditure of low-income households [por ejemplo, la energía] and only 10% of the total expenditures of high-income households, and its inflation rate is 10%, then the boon will increase inflation inequality by one percentage point,” says the text prepared by Gregory Claeys and Lionel Guetta-Genrenaud. The result is obvious: inflation does not affect all social classes equally.

In this way, rising prices contribute to deepening inequalities, which are already exacerbated by the economic crisis caused by the restrictions caused by the pandemic. Despite the recovery of employment and the achievement of more than 20 million social security contributions, runaway inflation continues to empty pockets day by day. Especially the less baggy ones.

Supply chains fail to return to normal

The psychosis that many in the commercial sector see as exaggerated possible downsides, such as a possible Christmas toy shortage, is over, but supply chains have yet to fully return to normal. Joan Tristany, CEO of AMEC, the Association of Internationalized Industrial Companies, explains that it is not known how the restrictions in China, which come with long queues at ports like Shanghai, will impact. Tristani is feeling strong demand but believes there is no general shortage of products right now, but very specific ones, although maritime trade, which accounts for more than 80% of global exchanges, has not returned to pre-pandemic times due to factors such as the price of containers, contributing to an increase inflation. “Container prices are still high, but we don’t think it will be that way for long. Things go up easily, but not so much that they fall down,” he notes.



Source: elpais.com

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