Spain’s inflation holds steady in June, but remains at high levels. The National Statistics Institute (INE) confirmed on Wednesday that the consumer price index (CPI) stood at 3.2% year on year, well above the European Central Bank’s 2% target, despite the VAT increase.
The rise in electricity and gas prices offset the fall in fuel prices, linked to a truce in the Middle East that has already collapsed. Core inflation, which excludes energy and unprocessed food because of their volatility, stood at 2.9%, one-tenth of a point lower than the previous month, in line with the INE’s flash estimate.
Electricity up 6% in June after the end of reduced VAT
Electricity played a key role in inflation and was 6% more expensive year on year in June, the second-warmest on record, marked by greater use of air conditioning and fans in homes.
In April and May, electricity saw year-on-year falls of 5.5% and 4.3%, respectively, which allowed the government to maintain the VAT cut introduced to cushion the economic impact of the war. Scrapping this measure is seen as having contributed to the rebound in electricity prices in June, although the Economy Ministry stresses the stability of overall inflation.
The finance minister, Arcadi España García, said in a post on social network X that: “The CPI data for June confirm the effectiveness of the Spanish government’s measures. In an international context marked by uncertainty, inflation remains stable and food prices have slowed their rise to 1.9%. These figures reflect the impact of policies supporting families and businesses, along with the push for renewable energy, which strengthens the resilience of our economy.”
The first vice-president and economy minister, Carlos Cuerpo, argues that the figures “corroborate that the government’s response plan continues to meet its objective: cushioning the impact of the war in Iran on inflation and protecting households’ purchasing power“, according to sources from his department. They add that the focus on renewable energy is “precisely what makes it possible to scale back emergency measures from a position of strength”.
Food and non-alcoholic beverages offered some relief to the CPI, as their rise in June slowed to 1.9%, three-tenths of a point below the 2.2% recorded in May.
Fuel prices also felt the brief truce between the US and Iran
The truce between the United States and Iran, albeit brief, eased pressure on fuel prices in June, which rose more moderately even though the conflict has resumed and the Strait of Hormuz has yet to return to its usual level of activity.
Petrol went up by 1.3% and diesel by 14.1%, according to the INE. The Spanish government has continued the phased withdrawal of fuel subsidies, although the renewed escalation of tensions in the Middle East could again put upward pressure on oil prices.
Housing and tourism add upward pressure to inflation
The housing category saw its rise increase to 4.7% in June, compared with 1.4% in May, while transport slowed to a 5.1% increase. There was also a notable rise in prices at restaurants and accommodation, with the latter jumping 9.3% year on year.
Madrid recorded the highest provincial inflation in June, at 3.8%, followed by Las Palmas (3.6%). At the other end of the scale, Cáceres and Jaén posted the lowest rates, at 2.2%. By autonomous community, Extremadura saw the smallest increase in prices, at 2.4%.