Spain's inflation remains in check due to a delicate equilibrium between food and energy prices
In August, Spain experienced a mixed bag of inflationary pressures, with some positive signs of stabilization and others pointing towards ongoing challenges.
Global supply chain issues and climate-related factors have been driving up food prices for Spanish consumers in recent years. However, the latest figures suggest some stabilization in food prices, though they remain elevated compared to the period before the pandemic. This stabilization occurred after two consecutive months of upward movement in the inflation rate.
While food prices in August increased, less pronounced than a year ago, the same cannot be said for energy costs. Car fuel prices increased in August compared to the same month in 2023, due to seasonal demand and international pressures on oil markets. Petrol and diesel costs specifically rose, putting upward pressure on the overall inflation index.
Seasonal dynamics influence the August result, with fuel prices typically rising in summer due to increased road travel and tourism, and electricity demand affected by higher use of air conditioning. Fortunately, the decline in electricity prices offset the impact of more expensive fuel costs, softening the effect on family budgets during the peak of summer. In contrast, electricity bills decreased more sharply in August than in the same month in 2023, according to INE data.
The inflation rate in Spain remained stable at 2.7% in August, as reported by the National Statistics Institute (INE). Core inflation, which excludes energy and unprocessed food, recorded a modest increase in August, rising by 0.1 percentage points to reach 2.4%.
Looking ahead, the evolution of global oil prices, wholesale energy markets, and food supply chains will remain decisive in shaping the Consumer Price Index (CPI). The Spanish government has implemented measures to protect consumers, such as reduced VAT on certain basic foodstuffs and caps on gas prices, and future decisions on these policies could influence how inflation develops.
The European Central Bank (ECB) has been cautious about easing monetary policy too quickly, aware that inflationary pressures could return if energy markets become volatile once again. The ECB's official target for inflation is 2%, and Spain's inflation rate of 2.7% remains above this target.
In recent years, Spain has relied on government policies such as subsidies and price controls on essential goods and energy to protect consumers from high living costs. These measures have provided some relief, but the ongoing challenges in energy and food markets could continue to shape the CPI in the coming months.
