Headline inflation for Spain was released today (5.8%) and it came as a surprise against the short-term consensus (4.7%). Our prediction for this reading (5.79%) published one month ago came much closer to the realized inflation figure.
Our model picked well in advance both the downward pressures which the market was expecting but also some upward pressures that resulted in our better forecast.
The base of YoY inflation was 6.2%, so a high level to start with, and the consensus which was 4.7% was implying a very high MoM price decrease (~1.5%) which did not happen.
In our model, seasonal effects indeed were expected to exercise a downward pressure together with the decreasing levels of the PPI Electric Power Generation, Transmission & Distribution indicator that were happening before year end. Automotive gas & oil prices further declining to ~1.5EUR/liter at end of December from the levels seen in the last year were also expected to contribute to a potential decline. However, PPI – Food Products increased by end of December 2022 and we predicted them to drive CPI higher by the end of January 2023.
We will be updating the Eurozone countries we cover in the coming days.