Inflation hits new record high in Catalonia

BarcelonaThe prices of consumer goods and services rose by 9.7% year on year in Catalonia in June, according to data from the consumer price index (CPI) published on Tuesday by the Spanish Statistics Institute (INE). The figure is the highest since 2002, the first year in which the INE began publishing data by regions, but remains below the symbolic barrier of 10%, which was exceeded at the Spanish level.

In fact, INE data confirms figures for Spain as a whole, which placed the increase in prices at 10.2% year on year. At both Spanish and Catalan levels, the month-on-month CPI increase was 1.9%.

Fuel and electricity drove the increase in prices, alongside fresh fruit and package tours. The latter are in great demand after two years of pandemic restrictions hindering holiday plans. The main reason behind these increases in energy products is the continued rise in the price of natural gas and oil caused by the Russian invasion of Ukraine.

The Catalan Association of Economists, however, warns that core inflation is the particularly damaging figure. This is obtained by disregarding energy and fresh food, which are more volatile. At a Spanish level – the INE does not break it down the data regionally – core inflation 5.5% year-on-year figure for June is also confirmed, a very high figure and one that worries experts.

"As it grows, it means that inflation is more dispersed and it affects more products" beyond fuel and electricity, said Jordi Goula, member of the Association's Catalan economy committee, at the presentation of the report on the economic situation. Goula also stressed that in Europe price increases are rooted in supply problems, basically the aforementioned increases in energy commodity prices, while in other places like the United States there is an overheating of activity that has led to a sharp increase in consumption and wage increases that push up the CPI.

Downward revision of growth

The members of the Association fo Economists' committee expect downward revisions of growth forecasts for 2022 in Catalonia and Spain. In fact, some sectors are already talking about a delay in activity – this Tuesday SME association published a report on trade that confirmed this – despite the fact that most institutions expect growth data to remain positive in both 2022 and 2023.

In this sense, the Association of Economists' report has highlighted both the business confidence index and business investment data, which are positive and remain signs of "confidence in the economy", according to Goula, despite the dark clouds at the international level due to the war, the shortage of energy products and cereals and logistical problems as a result of restrictions to curb covid in China.

Spanish government measures

On Tuesday, Prime Minister Pedro Sanchez announced a new package of measures including extraordinary taxes on banks and electricity companies. "It is clear that they are making extraordinary profits and perhaps it is not a bad idea" to tax them, said Albert Carreras, a member of the Association of Economists' committee and a professor of economics at UPF, on energy companies' results. Carreras considers a tax has less impact on the functioning of the market but can have the same benefits of redistributing the cost of electricity because it does not affect families with fewer resources as much.

He was more critical with the gratuity of commuter trains. "Politically it is very aggressive," Carreras said, since the Spanish government "gets involved with the management" of the service, which is the Generalitat's responsibility, but "does not fix" any of the problems commuter trains have in Catalonia and which depend on the State, such as the lack of investment in track repairs or rolling stock. "The State makes the offer but it is the Generalitat that pays", he reiterated