I’ve long been suspicious of the published inflation.
I knew a lady in the UK who, one Friday in the month left her desk at the Department of Employment with a clipboard and a list of products that she gathered prices to compile the Retail Prices Index (RPI). She told me she had been doing this for over thirty years and that she was sure the game was rigged. Products that started to rise in value would leave the list and products falling in value would suddenly be added to it and monitored.
I naturally felt some suspicion when I learned this week that the inflation rate in Spain has fallen to its lowest level in 52 years, in fact since the recording of the figure began. http://www.ine.es/en/daco/daco42/daco421/ipc0114_en.pdf
Now if you talk to people in Spain about prices, you could forgiven for thinking this is a downright lie as nothing in our experience seems to ever get cheaper. Electricity has been creeping up every year, culminating in an announcement just before Christmas 2013 that the price of electricity would be going up more than 11% from the 1st of January making that a 119% increase in ten years. In the event a vast public outcry, spearheaded by the campaign #APAGÓN30D forced the government to step in and insist that this level of increase will not take place but instead a 4% increase will be levied – still far above the current rate of inflation.
The price of gas bottles which are widely used in Spain, is seasonally adjusted, but any fall in price is usually countered with a greater rise. When I arrived in Spain just over ten years ago a gas bottle was under seven euros. The last one I bought cost a staggering 17.50€
When you look at the figures that go in to making up the index, weightings are used so that the various sectors, transport, housing, clothing etc compete with each other to make a contribution. As you can see in the press release, all the sectors in which pricing has fallen have an increased weighting in the latest figures. There is no explanation as to why the weighting change, so one must assume it is the means by which the figures can be massaged by the government to give the best picture possible.
One benchmark I consider significant changed this week. A carton of Don Simon red wine, (for years known as the 95cnet carton) rose from it’s previous figure of 1,10€ to 1,20€ in Mercadona, the leading Spanish owned supermarket chain. Don Simon is probably the most quaffed wine in Spain having a huge market share. I’ve even seen Don Simon home delivery trucks pumping wine into the plastic bottles of eager housewives, such is their presence the market here. Why Don Simon’s price should shoot up 10 centimos during the lowest inflationary period in Spain’s history is beyond me, but it’s yet another sign that makes me suspect Spain’s inflation rate isn’t anywhere near as low as is stated!