Fynsa
Little by little the economy is "normalizing". After the party, the bill came and it did not come cheap. However, the latest figures show that we are slowly returning to less exceptional conditions. This is evidenced by the recent inflation data. The INE reported that the CPI increased 0.1% m/m during May, which was below our expectation (0.2% m/m) and that of the market (0.3% m/m). Thus, the y/y variation reached 8.7%, accumulating 2.3% so far this year. Let us recall that, as we have mentioned before, it is expected that year-on-year inflation will decrease by around 1 pp per month, as a result of the high comparison bases, a situation that would be maintained until September in a consistent manner.
On this occasion, the divisions with the highest positive incidences were Restaurants and hotels (+3.7% m/m, incidence 0.055 pp), and Household maintenance (+0.7% m/m, incidence 0.043 pp), which was partially offset by Transportation (-1.0% m/m, incidence -0.140 pp). Within the latter, the strong reduction in the price of interurban transportation (-12.6%, incidence -0.063 pp) stood out, which, although it has been seen on other occasions, is clearly out of the normal ranges for its seasonality. The same is valid for air fares, although for this product the surprise was not in the magnitude, but in the direction, as it is not used to falling during the month.
In underlying terms, the non-volatile CPI (IPCSV) increased 0.5% m/m, which partly reveals that, although decreasing, some inflationary pressures are still present. In any case, its year-on-year variation fell to 9.9%, dropping below double digits after 10 months. Disaggregating, the IPCSV of goods increased 0.6% m/m (10.6% y/y, from 11.4% y/y in April), while that of services increased 0.4% m/m (9.3% y/y, from 9.5% y/y in April). On the other hand, the diffusion index, measured as the percentage of goods that increased in price, reached 53%, which is somewhat above the average of the May since 2009 (49%).
As we saw in the second paragraph, although inflation continues to decline, the impact of the fall in the most volatile components of the basket is significantly higher than that of the underlying components. According to our calculations, the Central Bank should not have significant price surprises regarding the macro framework presented in March and, in the run-up to the publication of the June IPoM, its monetary policy stance should not be impacted either. With this on the table, we maintain our expectation that possible movements in the TPM will have to wait until September, despite the fact that part of the market is so eager to the contrary.
