Inflation in February in Spain ended with a lag compared to the same period in 2023. As a result, the consumer price index (CPI) came in at 2.8%. This is according to preliminary data from the Spanish National Institute of Statistics (INE).
It is the lowest inflation rate in the last six months. In August last year, it was 2.6%, then inflation rose. In January, the CPI was still 3.4%, now the upward trend has been broken. Core inflation, which excludes energy and fresh food, also declined, going from 3.6% to 3.4%. This is the lowest figure since March 2022, when the war in Ukraine broke out.
Groceries
In February 2023, food and non-alcoholic beverage prices were still up 16.6% year-on-year. That’s the highest percentage in the historical series that began in 1994. Now, February 2024, there is talk of a levelling off of the price increase. This moderation in food prices is partly due to the VAT reduction on basic foodstuffs, pasta and oils, which has been in force for more than a year.
The impact of energy on inflation
In addition to the shopping basket, energy was the other important factor in this moderation in inflation, although the base effect is less pronounced than for food.
“Electricity has done much better than expected and the strong winds have helped to generate more wind energy than expected. Which has depressed prices,” Fernández explained.
Not only has the price of natural gas fallen, but so have carbon dioxide (CO₂) emission rights. These are two important factors in determining energy prices in a day. At the same time, solar and wind power end the month with record generation, while hydropower also performed quite well thanks to the recent rains.
All this has caused the price of electricity on the wholesale market to plummet, reaching as much as €10 per megawatt hour (MWh). In February 2023, the average price was €133. Petrol and diesel have ensured that the decline has not been greater. According to estimates by the Complutense Institute for Economic Analysis (ICAE), both have had a slight year-on-year increase of between 0.9% and 0.2%. The month-on-month change would be between 3% and 3.5%.
Inflation expected to rise in March
Inflation is expected to pick up slightly in March as VAT on electricity is set to return to 21%. So far, it has been 10%. This tax cut is part of the anti-crisis package that the government has deployed to counter the negative effects of the war in Ukraine and the inflation crisis, which will be phased out this year.
Harmonised CPI
The Harmonised Index of Consumer Prices (HICP) – which compares inflation between European Union member states – also fell 0.6% from January, reaching 2.9% at the end of February.
