MADRID – Inflation in Spain declined further in May. According to preliminary data from the INE (Instituto Nacional de Estadística), inflation reached its lowest level of the year, at 3.2%.
That is a decrease of 0.1 percentage points compared to March. This is the lowest level since the inflation crisis due to the supply problems in the summer of 2021. Moreover ,the figure is better than what experts expected. They estimated a stabilisation of inflation at around 4%.
This 0.9 percentage point drop in inflation brings Spain closer to the European Central Bank’s goal of maintaining price stability at around 2%. With this inflation rate, Spain is one of the European countries with the lowest inflation. El Confidencial writes that Spain will take advantage of the “base year effect” until July to further moderate inflation, as prices rose sharply in 2022 until that month.
Decline mainly driven by fuel prices
The fall in inflation was mainly driven by fuel prices. In addition, core inflation, which excludes food and energy, also continues to ease in May, declining five tenths of a percentage point year-on-year to 6.1%. Furthermore, this is the lowest level of core inflation since November 2022.
Prices not yet to pre-war levels
The fall in industrial prices and raw materials already indicated that prices in Spain would gradually stabilise. However, prices are not expected to fall to levels before the invasion of Ukraine. At best, they will stabilise at current levels and households will be able to regain some of their lost purchasing power as their salaries rise.
Food prices seem to have peaked
The INE does not provide detailed data on inflation in the preliminary indicators, but does emphasise that food and fuels are the cause of the moderation. This is positive news, as rising food prices show clear signs they have reached their peak. Food price increases peaked in February with an annual increase of 16.6%. In April it fell 3.6 points to 12.9% and the INE predicts this decline to have continued into May.
Drop in oil price
As for fuels, the drop in oil prices has also led to lower rates at filling stations. In March and April there was already negative inflation, which meant that prices were lower than in the same months of the previous year (-13.8% and -2.2% respectively). Consequently, it is possible that this deflationary trend continued in May as well.
Greater purchasing power for consumers
Falling inflation in Spain is a positive development for consumers as it can increase purchasing power. Furthermore, it also reassures the policy of the European Central Bank, which strives for price stability in the eurozone. However, it remains to be seen whether the fall in inflation is a temporary phenomenon or turns out to be a lasting trend. The coming months will be decisive in this.
The full report with detailed figures on inflation in May will be published by INE shortly.