The inflation rate dropped to 8.9% in August, below the 9% initially estimated by the National Statistics Institute (INE) and the value recorded in July, when the year-on-year change in prices reached 9.1%.
Data released this Monday by the INE show that “the year-on-year change in the Consumer Price Index (CPI) was 8.9% in August 2022, a rate lower by 0.2 percentage points than that observed in the previous month”.
This downward revision was mainly due to the slowdown in the rise in energy prices. The prices of energy products showed an annual difference of 24%, lower than the 31.2% recorded in July, with this aggregate being the main responsible for the decline in the overall inflation rate, as highlighted by the INE.
Transport and housing, water, electricity, gas and other fuels also saw a slowdown in the year-on-year rate of change to 10.4% and 14.9% (in the previous month it had been 12.8% and 16.6% , respectively).
The INE highlights the year-on-year change in the prices of unprocessed food products, which was the highest since October 1990, standing at 15.4% (in July it was 13.2%), as well as the increases seen in restaurants and hotels and in food and non-alcoholic beverages, with changes of 16.3% and 15.3% (in the previous month the change had been 14.8% and 13.9%).
The indicator on underlying inflation, which excludes unprocessed food and energy, maintained the upward trend of previous months, registering a change of 6.5% in August, 0.3 percentage point more than in the previous month.
According to INE, “this is the highest value recorded since March 1994”.
Despite the decline seen in August, inflation remains at historically high levels, which led the Government to present a package of measures to support families.
War sent food prices soaring
INE also carried out an analysis of prices between February – when Russia invaded Ukraine – and August, concluding that the increase in food prices contributed significantly to the variation of inflation in this period.
In August, the CPI was 6.3% higher than in February, which was mainly due to food products, which contributed around 40% to the calculated value.
Looking in more detail at this aggregate, INE highlights the increase in meat prices (16.7%); bread and cereals (10.7%); fish (8.7%); fruit (13.7%); milk, cheese and eggs (10.3%); and oils and fats (22.9%), namely edible oils (36.2%).
From INE’s analysis of the evolution of the indices of these subgroups, it appears that “oils and fats registered relevant price increases from March onwards, the impact being later and less intense in the remaining subgroups under analysis”. However, the relatively low weight of this category (0.9%) in the total of the considered basket limits the impact of its variation on the total CPI.
It is still visible, underlines the INE, “a reduction in the level of the energy products index in August, due to the price reduction verified in the fuel component”.
In this aggregate, the biggest contributions to the change in the CPI came from electricity (change of 28% compared to February) and fuels and lubricants for personal transport equipment (5.4%).
According to the INE, the most relevant components of this subgroup are diesel (which had an increase of 8.2%) and gasoline (1.2%), which showed reductions in the last two months compared to the maximum reached in June.
The behavior of natural gas prices “reflects the significant impact of the war in Ukraine”, registering a variation of 35.5% between February and August, with maximums of 39.2% in May and June. However, according to INE, “the contribution of this item to the variation of the CPI is less relevant than the other energy products, given that its weight (0.5%) is much lower than that of the other components of this aggregate (7.7% )”.