Inflation, albeit temporary, affects your pocket
Inflation has become a source of debate in any conversation about the economy. It is also an increasingly important issue at the meetings of central banks. The cost of living is on the rise (the Spanish CPI was 3.3% in August) and, although there is widespread agreement that this increase will be temporary, “that does not mean it does not affect us.” This is how Alberto Matellán, head economist at MAPFRE Inversión, explained this situation during his weekly appearance on Radio Intereconomia’s program “A Media Sesión.”
This across-the-board price increase is shrinking purchasing power. In fact, this week the newspaper CincoDias published that, if inflation consolidates at these levels, it could end up “eating away” some 12 billion euros from the 2021 Budget due to the cost overrun related to pensions and public salaries, as well as knocking 1.5 points off the purchasing power of wage earners and reducing the value of families’ savings deposits by 28 billion. “The problem with such high inflation and the speed at which it has increased is that it hinders growth: the income available for consumption is lower in real terms, and families lose confidence and have less purchasing power,” explained Alberto. The expert ensures that inflation will return to levels of 1.5/2%, but it will still be high enough to affect investments.
It is precisely these less promising growth prospects at the beginning of the year that are causing a change of market sentiment, and caution prevails. That said, Matellán explained that even this cloud has a silver lining, as we had experienced very high growth levels in the first half of the year. At the end of the day, some corrections are healthy. What’s more, even China could be going through a rough patch according to the latest macroeconomic data, which point to a possible slowdown. In this regard, the MAPFRE economist concludes that this could be an opportunity for investors with a more aggressive profile and a speculative character, because it is causing Asian authorities to reconsider incentives
You can listen to Alberto Matellán every Wednesday from 12.15 pm on https://intereconomia.com/directo/