Half of IPC products is already in negative rates – Five Days

Half of IPC products is already in negative rates – Five Days

Risk of deflation limited for now. The CPI has dropped 0.3% in July and there are already six of the twelve groups analyzing the INE negative, with a weight of 47.11% of the total. Four are in deflation (five consecutive months of decline), although food (which has more weight in the CPI, with 18.7%) chains and three months of decline. The Russian veto on Spanish exports may be the last straw for that item

Recreational deflation (lowering prices continued) and disinflation (slowing growth thereof), government and experts seem to favor the largely through the second option and ruled it will produce a deflationary scenario and the consequences that can generate, such as delays in purchasing decisions of consumers or narrowing profit margins.

Eighteen research services that compose the panel Func predict that the CPI will end the year at 0.3% and there will be a rebound in prices in the first half of 2015 despite the fact that all these returned to negative rates in July , a decrease of 0.3%, according to data released yesterday by the INE. In a statement, the Ministry of Economy considered “temporary” reduction in CPI in July and hopes that in the coming months this index recovered slightly positive, in line with the forecast of experts. “This moderation in prices favorable impact on the purchasing power of incomes and consumption. It also facilitates the continued wage moderation and competitiveness, with the consequent positive impact on exports, facilitating continuity of recovery in output and employment “notes

Economics emphasizes that moderation in the CPI improves purchasing power, consumption and allows wage restraint

Of the twelve groups of products in the shopping cart, six of them (food and non-alcoholic beverages clothing and footwear, household items, medicine, communication and entertainment), with a weight of 47.11%, are negative. All but food, clothing and medicine, spent more than five months of falling prices, bringing the weight of the products in deflation is limited to 20.6%. However, foods, starting with a higher weight in the CPI with 18.9% of the total, have chained three straight months with falling prices and the Russian veto on Spanish exports can trigger a prolonged phase of reversal in Prices and cause this heading into a deflationary spiral. The Russian blockade of European food exports will generate an oversupply that could involve a collapse of prices in the coming months. An effect that try to mitigate agricultural organizations in meetings with EU authorities, demanding compensation for the interruption of sales

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Unions disagree and ask for wage increases

The unions disagree with the view less Government dramatic and experts on brain-drawing statistics of prices in Spain. In the last twelve months, the CPI has fallen three times, and in the last ten months has risen 0.4%. Moreover, core inflation, which excludes volatile items such as fresh food and energy products, takes three months for zero growth, which for the unions is an example of the paralysis of the economy. To avoid this situation, CCOO claimed yesterday a wage increase to boost demand and economic activity and thus to combat the risk of deflation. In his view, the economic recovery happens “necessarily” the revival of domestic demand, which will only be possible with the increased purchasing power of wages, and employment recovery and picture quality. In it, UGT called for a “radical” change that improves the purchasing power of wages and generate quality jobs.

From a less autonomous organizations is critical reading. The National Federation of Associations of Self (ATA) has called for measures to address the drop in inflation, but also considered the fall in prices of electricity and fuel as positive as it improves competitiveness.

Moreover, the Union of Workers Associations, Agencies and Entrepreneurs (UATAE) described as “troubling” that this lowering of the IPC results from a reduced demand remains without tone after adjustments. UATAE sought better wages and better access to credit to return to positive rates at IPC.

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