How we hit the biggest price hike in three decades and why the recovery threatens

• ALEJANDRA OLCESE

  @AlejandraOlcese

• ELSA MARTÍN (GRAPHICS)

  @elsa_millan

Updated Friday, October 29, 2021-02: 00

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The 5.5% rise in the

(

) in October, levels not seen since 1992, has triggered fears that

be installed

that will hinder the economic recovery, but the situation in which the country is very different from then.

This is how different economists consulted by this medium explain it, who send a message of tranquility: there is no aspect that suggests that inflation has come to stay.

But the fear of price rises is spreading and unions are beginning to press for

, as will

and

.

Although these price increases were not seen in Spain for

, there are big differences between the scenario now and then, starting with the duration.

The

but has only been exceeded 3% in the last quarter, and you can not lose sight that inflation in the Eurozone -and Spain- had a decade at very low levels.

In

,

the inflation that

then was a consequence of structural conditions. Since the 1970s, a problem of differential inflation has been dragging on in Spain with respect to Europe and it must also be taken into account that in 1988 there was a general strike and that pushed up wages, "explains economist

collaborator of EsadeEcPol

, to EL MUNDO

.

The second difference is that three decades ago the rise in prices was generalized and

, while now

are the

main responsible for this rise in prices.

"There was an indexation of the economy and this made inflation permanent. Now that does not happen, the heading that has risen is energy, which is closely linked to the rising cost of raw materials," says

, director of the

.

Prices are growing worldwide because there has been a

(demand has recovered very quickly and supply has not been able to meet it) and at the same time there have been

due to the lack of inputs and raw materials (which in turn affects prices).

The perfect Storm.

The risk of an inflationary spiral

But although overall inflation rises, the

which excludes the price of energy and food (more volatile items) - up 1.4% in October, four points less than the overall CPI.

To this is added that the CPI is conditioned on this occasion by the

that is, by a comparison with a period in 2020 marked by the economic contraction that caused the pandemic and by falling prices.

Although the scenario of then is far from resembling that of now, there is a risk that this inflation will become chronic if it translates into "

", that is, if it generates

that in turn produce more price increases, which would open the door to an

It is important to prevent this from happening, but

by indexing the rise in

and

salaries

according to the CPI.

"I think this episode will be transitory. It comes from exceptional situations in energy and certain raw materials and components, which should gradually disappear. But there is a certain risk that it will become chronic if we get nervous and we all try to recover the loss at the same time, in salaries and benefits, "says

, director of

.

Here's the key: if second-round effects are minimized, inflation is more likely to be transitory. If this does not happen or if panic sets in and central banks are forced to

(the president of the ECB herself,

, acknowledged this Thursday that at her monetary policy meeting they had only talked about "inflation, inflation and inflation "), then

could be

, especially given the high level of debt of companies, families and states.

"People are confusing what inflation is at a given moment with a consolidated inflationary trend. It is about

. A rise in interest rates would spoil the recovery," warns

, principal investigator at the

This expert also points out that in recent years there have been a series of factors that have tended to

(such as aging or the introduction of China into world trade) and these aspects "have not disappeared overnight" .

Source:

INE and Omie

Graphics:

Elsa Martín

Art direction:

María González Manteca.

According to the criteria of The Trust Project

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