This morning the focus has switched to Spain as we see yet another record in the inflation arena. You would have to have not much of a heart to feel no sympathy for Spanish workers and consumers after reading this morning’s official release.
The estimated annual inflation of the CPI in March 2022 is 9.8%, according to the flash indicator prepared by the NSI.
This indicator provides a preview of the CPI which, if confirmed, would mean an increase of more than two points in its annual rate, since in February this variation was 7.6%. This rate would be the highest since May 1985.
This is their domestic measure of inflation which I am looking at because we are now seeing levels of inflation which need to be compared with the pre Euro area era. In terms of the breakdown we are told this.
This development is due to generalised increases in most of its components. These included increases in electricity prices, in fuels and oil prices, and in food and non-alcoholic beverages prices, higher this month than in March 2021
So there will be little surprise about the leader of this particular pack. But we are seeing a double whammy on the essential items front with food price inflation now chasing energy inflation. Indeed if you can avoid both, and the best of luck with that, the inflation picture improves considerably.
For its part, the estimated annual variation rate of underlying inflation (general index excluding non-processed food and energy products) increases four tenths to 3.4%. If confirmed, it would be the highest since September 2008.
Right now research assistants and Phd’s at the Bank of Spain and ECB will be beavering away to explain how those non-core items are not really important after all. I do hope they wont be using the wi-fi to do it.
As it happens the Euro area measure is showing the same annual rate of inflation.
In March, the estimated annual variation rate of the HCPI stood at 9.8%, more than two points
higher than the one registered in the previous month
But it has got there by catching up in March.
For its part, the estimated monthly variation of the HCPI is 3.9%……..Consumer prices registered a rate of 3.0% in March compared to February, according to the
leading indicator of the CPI.
El Pais has simmarised the state of play below.
The Ministry of Economic Affairs has detailed that 73% of the price increase is due to the impact of the invasion of Ukraine on energy and unprocessed food, and sees it as urgent “to reverse this upward trend” to deploy the aid package as soon as possible approved on Tuesday, of up to 16,000 million (6,000 million in direct aid and tax rebates, and another 10,000 million in ICO credits). Its measures include a discount of 20 cents on the price of fuel which goes into effect this Friday.
As you can see the PR operation to blame things in the war in Ukraine is in full swing and they will be hoping that at least some forget that there was an issue before then. The idea of an aid package is similar in an attempt to deceive because it switches the cost from the consumer to the taxpayer who is mostly the same person. It may make the inflation numbers look better for the same situation as the fuel price cut will for example but the taxpayer gets the tab.
Also we see that central bankers seem to be cut from the same piece of cloth.
The governor of the Bank of Spain, Pablo Hernández de Cos, already announced the day before that the inflation data would be “particularly negative”, and advocated an income pact between workers and employers to prevent feedback.
It was only yesterday we were reminded of similar views from Bank of England Governor Andrew Bailey. Whilst the Governor of the Bank of Spain receives a relatively paltry 215,000 Euros a year in pay and benefits it is still enough for him to be pretty well insulated from inflation concerns.
The transport strike has affected both inflation and economic output.
MADRID, March 29 (Reuters) – Steel giant ArcelorMittal (MT.LU) said on Tuesday it had idled three steel mills in Spain and partly closed two others after a two-week truckers strike disrupted supplies of scrap metal, iron ore and equipment.
The company was forced to suspend output at its Bergara mill, in the Basque Country, on March 16 and at its Legasa and Lesaka mills, in Navarra, on March 26 as a result of the strike, a spokesperson said on Tuesday.
This is added to the supply chain issues as El Pais points out.
And on the international flank, the confinements of Shenzhen – the most important technological hub in China -, Shanghai – the most populous city – and other cities, within the strict zero covid strategy launched by Beijing, have generated new logistical imbalances and delays.
Germany
It is not just Spain that is seeing an inflation surge as Reuters have just pointed out.
BERLIN — German inflation is likely running above 7% in March, regional data from five states suggested, surpassing analyst predictions for federal data that is set to be released later on Wednesday.
The states of Bavaria, North Rhine-Westphalia, Saxony, Brandenburg and Hesse posted annual consumer price inflation in a range between 7% and 8%, coming to an average of 7.54%.
Comment
We can hot foot to a speech given by ECB President Christine Lagarde in Cyprus this morning. She opens with an outright attempt to rewrite history.
Before the Russia-Ukraine war began, the euro area economy was rebounding well from the pandemic. The recovery was much faster and more job-rich than after previous recessions.
The economy was slowing in response to the energy price rises that preceded the war. It has made them worse but there were existing problems. In the circumstances the quote below is especially breathtaking even from the woman who described the bailout of Greece as a triumph ( “shock and awe”) just as the economy collapsed.
This strong performance owes a lot to the exceptional policy response in the euro area, where fiscal and monetary policy worked hand-in-hand to protect incomes and demand.
Suddenly the “protect(ed) incomes” seem to be falling.
This effect already reduced income by 1.2% of GDP[2] in the fourth quarter of 2021, compared with the same quarter in 2019 before the pandemic. Expressed in euro, that figure would imply a loss of about €150 billion in one year.
Also if one of the causes began in 2020 how has she got this so wrong?
This reflects, in part, the decision by OPEC+ to cut oil supply by 9.7 million barrels per day in 2020, followed by the failure of some members to return supply to its previous levels.
In fact we are seeing the opposite of what she forecast.
Based on national surveys, households’ expectations of growth have worsened, while their inflation expectations have risen.
The incomes which only a few short sentences ago were doing so well are now like this.
This suggests that people are expecting to see their real income (i.e. their income adjusted for inflation) squeezed.
This is a very important point because so of this is due to her actions in increasing the money supply which leads to inflation. Central bankers love to draw attention to the short-term gains from their actions whilst denying the medium and longer-term consequences.
What will she do? Fiddle whilst inflation burns.
Reflecting this uncertainty, at the last Governing Council meeting ECB staff prepared different scenarios to capture some of the possible outcomes……. This is why we are continually monitoring the incoming data and updating our analysis accordingly.
It is hard to know what to say about someone who talks about “further progress” when inflation is treble the target and rising.
But if the medium-term inflation outlook changes and if financing conditions become inconsistent with further progress towards our 2% target,
Notayesmanseconomics's Blog 
Hi Shaun, obviously I know far less about foreign economies than the little I know about this one, which is another value of your work for which I am grateful, so forgive me if project UK values onto EU economy, which I realise will not be absolutely the same, & allow for, or better still, correct my mistakes:
It seems to be that the only two countries which have, in the long run, benefitted from € membership are France & Germany.
Germany because its exports benefit from the lower exchange rate it enjoys, rather than the one it would have with a stand-alone Mark.
France, because of the peace that has been enjoyed because Germany has not had economic problems like in the 1920s&30s.
Everyone else seems to be paying the price of Germany’s well-being.
Were it not for the globalists in charge in Spain, Italy etc. being prepared to allow their citizens to bear the costs of following their agenda, the € would surely have gone belly-up a decade ago.
(This is typical of the weasel words of the NWO where they say that unity brings prosperity, but only for some.
Where a “healthier” diet actually means red meat prices being taken beyond the average family budget.
Where what you can rent depends upon your social score, & you CAN rent anything you want, but only if you’re a good, compliant boy.)
So Shaun, my question is, “Is it possible to quantify the growth & prosperity lost to Spain, Italy etc. to feed Germany’s, & if you can, will you?”
try
cepStudy
20 Years of the Euro: Winners and Losers
as a starter
forbin
except
“If the countries had separate currencies, the German and Dutch exchange rates would have risen and the Greek and Italian rates would have dropped, but with a single exchange rate, the northern economies became more internationally competitive and the southern economies found it harder to make headway in world markets.
A measure of the ‘real exchange rate’, which looks at how much international currency is required to buy a unit of labour, shows that between 2002 and 2008, when the financial crisis struck, German labour became 54% cheaper while Greek labour became 7% more expensive, measured in euros.”
winners and losers
there is much work out there on this subject
Forbin
Hello Shaun,
As far as OPEC + supply , well OPEC itself is down about 4 million barrels a day and the biggest cheat producing TOO MUCH is Russia !
Finding a replacement for Russian oil , when its one of the big three , is tricky . about 10.5 million barrels . So no wonder the about turn on Venezuela and Iran but thats not going to help much
As pointed out yesterday the EU economy was declining before the Pox and has just go worse.
What can the ECB do about it ? apart from resign?
Well they could re-arrange the deck chairs again
Forbin
Gernmany is facing real trouble at the moment and is warning on its gas supply:
https://www.bbc.co.uk/news/business-60925016
Its looking to me like Europe inflation is going to go even higher and it reminds me of our inflation in the late 70s and 80s but the causation different.
The tool the banks used to curb inflation was to raise interesst rates but the Europe is reluctant to use this tool. A lot of the inflation been blamed on the war but we also had bottlenecks in supply and freighter costs which pushed up prices.
We all may face higher inflation through wheat prices much higher than we are now seeing in shops.
Has any got an answer or suggestion as to how to deal with inflation without making things worse?
To reduce inflation and improve the quality of life for everyone on the planet then we need less people and must stop the population increasing. Otherwise we have more people competing for the same fixed resources and until we mine the moon and asteroids we are not going to get more resources than we have on this planet. We have already removed all the “easy” to extract resources like gas, oil, coal and metals and to get more of these we will either need expensive extraction methods or a radical breakthrough in using microbes to recycle material.
bootsy,
A number of countries have seen their population in decline or the birth rate fall, Russia has seen a decline in their population in particular. The birth rate of Britain is in decline but the population is increasing.
I don’t think there is any easy answer to the current problems we were comming out of covid and now caught up with the war in Ukraine.
One of the biggest worries a year or so ago was the elderly in most countries placing a burden on the next generation we hadn’t ansewere that problem before the war in Ukraine pushed up inflation, but inflation had already gotten out of control before the war started.
I read a report yesterday, the US saying Europe would avoid a recession, but with inflation set to be in double digits something will give sooner or later.
how to deal with inflation without making things worse?
worse for who ?
for the like of me , no , but inflation for the 1% is no big deal , they have more than enough and in some ways inflation is good for them , ie assets , shares and housing .
Forbin
well actually
1, cheaper fuel , like electricity and gas
2, cheaper food – like return of BOGOF
3, less people for cheaper housing , meeting climate goals and cheaper food as we’d have the land for more farming
4, Dump Green , we’re not going to save the planet anytime soon so why the hair shirt mentality ? All the big carbon burners have stuck thie collective middle finger up and will burn anything we don’t and more so its a waste of time !
none of these are so called “core” so I expect the opposite to be done (!)
Forbin
forbin, as you are far clued up than I am have you done the maths as to how much the various tiers pay in tax in the UK?
I would be interested to know to see how much a few pence on the higher rate would produce in revenue?
Have heard arguments if you raise the higher rate it would’t produce much revenue as the rich only account for a very small perventage of the overal population. but i would like more data and tiers.
well that actually politics !
however ,
According to HMRC figures, in 2019/20, the top 1% of income tax payers (those expected to have pre-tax incomes of over £189,099) received 13% of all income, and contributed 30% of all income tax receipts.
The same HMRC figures showed the top 10% of income taxpayers, in terms of those receiving the largest incomes, contributed over 60% of all income tax receipts.
As for rasing the rate from 45% to 75% , well it was dropped back to 50% very quickly as revinues plummeted .
I dont think therefore that any government can raise their top rate above 50% in the West.
Forbin
“Before the Russia-Ukraine war began, the euro area economy was rebounding well from the pandemic. The recovery was much faster and more job-rich than after previous recessions.”
I don’t know how she can say this with a straight face except she feels safe in the fact that the MSM like the FT will just not report it because it might damage the EU.
Hi Rzzr
Some of it is bias but it is also true that so much journalism these days simply involves copy and pasting the official release. I doubt the media will be all over the issue below like they were the supply issues in the UK
I think in many ways you are too hard on Mme Lagarde, as far as I know she has never pretended to know anything about economics, she is a political appointee and I am sure she does not write her own speeches. However as the head honcho she should be questioning her underlings as to why they make her speak so many untruths.
your not saying she was a “diversity ” hire ?
😉
Of course you could say that she was an ambassador, for as you know , “An ambassador is an honest gentleman sent to lie abroad for the good of his country.” Except of course in the case of Mme Lagarde her honesty has been , as is well known, called into question.
She’s a lawyer.
So why did she apply for the IMF & ECB positions?
Hi PeterH
Her mistakes of which Greece and Argentina are the most famous have hurt a lot of people and yet she is in with the in-crowd and cruises onto her next role. The latest rumour is hat should things go Macon’s way in the elections that she will be made Prime Minister.
Bad for France but she will come up on my radar scope much less frequently should that prove to be true.
On the energy front: a new peer-reviewed paper states that climate panic is inappropriate as the latest version of climate models still over-estimate the effects of atmospheric carbon on temperature:
https://agupubs.onlinelibrary.wiley.com/doi/10.1029/2022GL097716
Plain Language Summary
The last-generation Coupled Model Intercomparison Projects (CMIP6) global circulation models (GCMs) are used by scientists and policymakers to interpret past and future climatic changes and to determine appropriate (adaptation or mitigation) policies to optimally address scenario-related climate-change hazards. However, these models are affected by large uncertainties. For example, their equilibrium climate sensitivity (ECS) varies from 1.83°C to 5.67°C, which makes their 21st-century predicted warming levels very uncertain. This issue is here addressed by testing the GCMs’ global and local performance in predicting the 1980–2021 warming rates against the ERA5-T2m records and by grouping them into three equilibrium climate sensitivity (ECS) classes (low-ECS, 1.80–3.00°C; medium-ECS, 3.01–4.50°C; high-ECS, 4.51–6.00°C). We found that: (a) all models with ECS > 3.0°C overestimate the observed global surface warming; (b) Student t-tests show model failure over 60% (low-ECS) to 81% (high-ECS) of the Earth’s surface. Thus, the high and medium-ECS GCMs do not appear to be consistent with the observations and should not be used for implementing policies based on their scenario forecasts. The low-ECS GCMs perform better, although not optimally; however, they are also found unalarming because for the next decades they predict moderate warming: ΔTpreindustrial→2050 ≲ 2°C.
yup been saying this for some time
if I know it you can be sure the TPTB have known it well before me .
climate change was a mouse sold as an elephant
Now you know why China described Greta as a “happy meal” …. ( for god’s sake thats a joke ! )
Forbin
Good stuff, you are doing your homework!
Pre-Industrially means when we were still emerging from the Little Ice Age.
Nobody knows what the temperatures were really like, outside Europe & N.America in pre-industrial times, so it’s all a fraud.
I “do my homework” because I take the initial view that everyone has an agenda. So I have to investigate both sides of the story, and I have to decide who benefits from the argument they propose.
It’s not conclusive, but those with least to gain personally are often the most honest, just as they are usually most often willing to debate the facts.
That ALL climate scientists, or rather climate agitators will not debate, is telling, as is the fact that most of the retired top climate scientists, who are no longer chasing grants or prestige, are sceptics.