Lorraine Williamson
Inflation in Spain increased by 0.1% to 2.9% in January, setting a new six-month high, according to data published by the National Institute of Statistics (INE).
While various sectors experienced price increases, some products and services became more affordable.
Inflation trends and CPI developments
The Consumer Price Index (CPI) has reached its highest level since June 2024, continuing its upward trajectory after a temporary recovery in October. Inflation is now just one percentage point away from the stability target the European Central Bank (ECB) set.
Price increases: Electricity, sunflower oil, and transport
- Electricity increased by over 11% in January, marking the highest monthly rise in two years.
- Private health insurance, sunflower oil, and liquid home fuels saw price hikes.
- Vegetables and legumes prices rose by more than 5%.
- Transport sector increased year-on-year by 0.7% to 1.3%, reflecting higher fuel and lubricant costs for passenger cars.
- Housing costs increased by 0.5% to 7.9%, largely due to rising electricity prices. From January 1, 2025, VAT on electricity returned to 21%, up from the previous 10% reduction in 2024.
Over the past year, electricity prices have surged by over 20%, reaching their highest level since October 2022, when energy costs peaked following the outbreak of the war in Ukraine.
Price Drops: Clothing, Shoes, and Olive Oil
- Clothing: Decreased by 12% due to winter sales.
- Shoes: Fell by 11.2%.
- Leisure and culture sector: Dropped by 3.3%, mainly due to lower package holiday prices.
- Olive oil: Continued its downward trend, falling by more than 7%.
Inflation Data for January
Annual inflation stood at 2.9%, slightly lower than the initial estimate of 3% by INE. The monthly CPI figure of 0.2% matched earlier forecasts. The increase in the CPI was primarily driven by rising fuel and electricity costs.
Monthly Inflation Trends
On a monthly basis, the CPI rose by 0.2% in January 2025 compared to December 2024. This represents the largest inflation increase in a January month since 2000 and marks the fourth consecutive month of rising inflation. The surge was primarily driven by housing costs (3.8%) and transport sector costs (0.8%).
ECB’s Assessment of Inflation
The European Central Bank (ECB) considers a 2% medium-term inflation target to be essential for maintaining price stability across the eurozone, according to the Bank of Spain. However, with Spain currently exceeding this target by one percentage point, economic instability remains a concern.
As inflation continues its upward trend, Spanish consumers and businesses face ongoing price pressures, reinforcing the need for close monitoring and potential policy adjustments in the months ahead.
Also read: Tips to save on energy costs in your home in Spain