Inflation in Spain slightly up in April

by Lorraine Williamson
April inflation

Inflation rose slightly to 3.3% in April, Spanish statistics agency INE reported. This is a tenth of a percentage point more than the March figure, although the underlying figure – which excludes energy and fresh food – continued to fall, from 3.3% to 2.9%. Analysts expect this to decline further in the coming months.

The inflation rate in April reflects the decrease in the prices of the items that make up the Spanish shopping basket analysed by the CPI. However, the monthly development continues to show the ups and downs of the so-called step effect. This is due to the recovery of ordinary energy tax rates after the cuts during the depths of the electricity crisis. In fact, this is the second consecutive month of increases in the index.

Increase in costs due to gas and food prices The Ministry of Economic Affairs blames the inflation in April on the increase in gas and food prices. Gasoline and diesel have risen in value as a result of ongoing supply constraints by OPEC, which wants to push international oil prices up at all costs. In April, the price increase was exacerbated by the direct confrontation between Iran and Israel. Tensions in the Middle East have also affected the crude oil market, pushing the average price of gasoline to a new annual high last week . A litre cost €1.68, the highest level since October last year. Diesel has risen in price by 4.3% this year.

Fuel prices lower than eurozone average

Nevertheless, the price of fuel in Spain is still below the eurozone average. The average price for a litre of petrol is €1.86, according to the latest Oil Bulletin. This is almost 20 cents more than at the Spanish gas stations. The same is true for diesel, partly due to the lower cost of the raw material, but mainly because tax rates are lower than in the rest of the European Union.

Cogesa Expats

Electricity became cheaper

On the other hand, electricity is becoming cheaper and cheaper. Everything indicates that April is the cheapest month in the history of the Spanish electricity market. The more than eight million customers who opt for the historically cheaper PVPC tariff have seen their bills fall in recent weeks compared to previous months. Despite the fact that there was still a reduced VAT rate at the time. Those affected by the return to the norm are the free-market consumers, most of whom have permanent contracts. In these cases, the price to be paid is fixed in advance in the contract between the user and the electricity company and does not vary with the wholesale price. Therefore, the VAT increase of 11 points (from 10% reduced to the standard rate of 21%) is passed on to the electricity bill.

Increase lower than last year in April

Looking back, the conclusion is that the increase in April is considerably more modest than that of a year ago. At that time, the CPI showed an increase of 4.1%. This means that the base effect played a positive role in the month of April. Still, think tank Funcas warns that this statistical bias is decreasing. In the upcoming indices, prices will no longer be compared with the high prices due to the war in Ukraine. But with that of the de-escalation that took place after last summer. This could translate into year-on-year increases, although it is not expected to impact core inflation.

Rate cut expected in June

The first interest rate cut by the European Central Bank is expected to come in June. If implemented, it would be the first monetary authority among developed economies to lower the price of money. There are two reasons for the decision. First of all, the marked fall in inflation and, secondly, the weak economic growth in the European Union. The International Monetary Fund already this month lowered its growth forecast for the eurozone in 2024 from 0.9% to 0.8%.


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