Inflation continues to fall in Spain at a faster rate than expected. The year-on-year rate moderated to 1.9% in June, a number not seen since April 2021. This rate was also 1.3 points lower than in May. Low increases in fuel, electricity and food prices largely explain this decline in the Consumer Price Index (CPI).
With this data, Spain became the first country in the eurozone to reduce the inflation rate below 2%, the reference level of the European Central Bank (ECB) that will not continue to raise interest rates.
However, Germany, France and Italy still register inflation above 6% (May data), something that, along with the persistence of underlying inflation – which excludes food and energy – causes the ECB to continue raising at the rate. , which in Europe is already at 4%. In fact, in July there will be another increase.
The advance data published this Thursday by the National Institute of Statistics (INE) also confirmed a drop in core inflation: it moderated by two tenths, to 5.9%. This drop, however, is lower than the overall rate. The core inflation is almost double the general inflation and this is due to the continuous increase in the price of fuel, groceries and electricity. This increase, in any case, is much less than last year.
The annual inflation rate has not moved around 2% since the first months of 2021 – in March of that year it was 1.3% and in April 2.2%. Since then, the IPC began a progressive increase that was highlighted months later by the war in Ukraine. That rise culminated in July 2022, when inflation reached its ceiling with a rate of 10.8%, the highest since 1984.
However, by keeping it above 5.5%, the Government has continued to reduce VAT on food. On Tuesday, the Executive extended the measure until the end of the year, although it established that the tax cut will be canceled on November 1 if the September figure for so-called underlying inflation is below 5.5%.
With the decrease in June, inflation has two consecutive months of falling after it moderated in nine tenths of May, to 3.2%. Last year, inflation decreased almost nine points, emphasized the Government.
The Ministry of Economic Affairs and Digital Transformation highlighted that Spain is the first country among the major economies of the eurozone to manage to reduce inflation below 2%.
“Spain remains one of the countries with the lowest inflation in the European Union, with a consequent gain in the competitiveness and market share of Spanish companies,” they pointed out from Economía.
The Ministry of Economy also indicated that the inflation data for June confirmed the moderation in the prices of food and non-alcoholic beverages, fuel and electricity. “The effectiveness of the main measures of tax reduction and bonuses has been confirmed,” said Economía.
In monthly terms (June to May), the CPI registered an increase of 0.6% compared to the price stability registered in the previous month.