In the month of October, the interannual rate of the Consumer Price Index (CPI) decreased four tenths to -0.8%, accumulating seven months in negative. Inflation intensifies its rate of decline, due to the greater decline in the prices of energy products and the slowdown in the underlying.
Thus, core inflation continues its deceleration path and stands at 0.3%, one tenth less than the previous month. Analyzing their components, it is observed that they remain at very low or even practically zero rates. Thus, the prices of services decreased two tenths to 0.1%, the prices of industrial goods without energy products decreased their rate of variation two tenths to 0.0%, and processed foods, beverages and tobacco decreased its interannual variation by one tenth to 1.0%.
The prices of unprocessed foods also decreased their variation rate by one tenth to 4.1%, although they continued to be the most inflationary component of the basket, with the most intense increases concentrated in the headings of fresh fruits, sheep meat and legumes and vegetables.
Energy prices in the month of October intensify their rate of decline. Specifically, the interannual rate this month for the prices of energy products was -11.1%, compared to -8.5% the previous month.
After the notable fall in September, the price of oil continued to decline, although at a slower pace. Brent crude reached 39.8 dollars / barrel on a monthly basis, compared to 40.7 dollars / barrel in September, while in year-on-year terms the drop was somewhat less intense (-34.0%). Doubts about the intensity of the economic recovery are leading to lower forecasts of world oil demand, so prices are expected to remain stable around 40 dollars / barrel over the next few months, therefore energy will continue to push inflation down.
The Harmonized Consumer Price Index fell three tenths in October, down to ‑0.9%, and the average index for the Economic and Monetary Union remained at ‑0.3%, according to the Eurostat advanced indicator. Thus, the negative differential with the euro zone increases again and stands at six tenths.
Looking ahead to the coming months, inflation will continue to register negative rates and will be conditioned by the behavior of oil prices and the drop in demand for some goods and services derived from the coronavirus crisis. In 2020 as a whole, we anticipate a slightly negative average CPI rate (-0.3%).
In this context of weak demand, final prices continue to fall at the same time that companies must continue to assume increases in production costs, so their margins are being sharply reduced.
