The most recent OECD report revealed that Annual inflation, measured by the Consumer Price Index (CPI), increased from 5.8% in November to 6.0% in December 2023after three consecutive months of declines.
This, in the words of Alejandro Espitia, Professor of Development and Macroeconomics at Pontificia Universidad Javeriana, “is due, among other things, to the fact that an average is taken. Relatively core inflation is very stable, so the increase is relatively small in all countries, but it is falling“.
The OECD also reported that increases were recorded in 14 countries, less than the number of countries that decreased, in 21 cases, and remained stable in the remaining three countries.. Regarding this, Espitia stated that the fact that in some countries there was an increase and in others a decrease “is a sign that the bottlenecks were not the problem of increase.” That is to say, “a good part of inflation is due to increases in disproportionate spending since the pandemic, inflation in the end is the loss of value of money, the fact that some countries increase and others do not shows that it has not been possible to control the increased spending,” Espitia concluded.
Inflation, which does not include food and energy, remained stable at 6.7% in Decemberthat is, it remains 0.7 percentage points above general inflation.
Regarding food inflation, it slowed down 6.7% in December after having remained at 7.1% in November. This slowdown was seen in 31 countries and, on the other hand, energy inflation remained negative, completing 8 months with this trend.
Despite the increases recorded between November and December of last year, compared to 2022, OECD inflation in 2023 was approximately 2.5 percentage points below the average the previous year. This is mainly due to energy deflation, which was -0.9% on average annually in 2023 compared to 29.6% in 2022.
According to Espitia, this energy deflation is due to “the reduction in oil prices, an increase in its supply, the reserves that have been found to be extensive and These new discoveries drive growth in the supply of fuels and this causes the price to drop.“.
For other countries, such as those of the G7, the variation in interannual inflation was lower, since it remained at 3.2% for December, which represents some stability compared to the 3.1% that was registered in November.. The country that recorded the biggest increase in this area was Germany where inflation rose to 3.7% in December from 3.2% in November. Other countries such as Canada, France and the United States presented smaller increases.
In G20 countries, annual inflation rose to 6.5% in December, which would be the highest level since April of the same year. Inflation decreased in countries such as South Africa, Indonesia and Saudi Arabia, but in the case of Argentina, for example, it increased. Other countries such as Brazil and India remained stable.
For his part, Espitia, faced with this panorama, stated that by 2024 “Inflation in OECD countries is expected to decrease. The issue is that the projections were perhaps very optimistic. The OECD expected it to be 6.6% in 2024 and 3.8% in 2025,” but as the expert explained, this may not be as fast as had been projected.
To this is added that “may mean that the Fed’s interest rate does not drop as much as expected, which may slow growth“concluded the expert.