Spain’s latest inflation report is out, and it’s painting a picture that’s a bit more colorful than expected. The National Statistics Institute revealed that year-on-year inflation for May hit 3.6%, up from April’s 3.3% and exactly in line with market forecasts. The main driver behind this uptick? Housing costs, which surged by 1.2 points to 5.2%, thanks largely to a spike in electricity prices. It seems the respite from lower electricity costs last year was short-lived, as this May saw those prices crank back up, putting extra strain on household budgets.
Transport costs also played a role in the inflation dance, with a rise to 3.8%, driven by fuel prices that didn’t drop as much as they did the previous year. Adding to the mix, the hospitality sector saw a slight increase, with inflation for hotels, cafes, and restaurants inching up by 0.7%. Meanwhile, fashion enthusiasts felt the pinch as clothing and footwear prices jumped by 2.3%, spurred by a strong demand for new spring-summer collections.
Not all news was inflationary, though. Prices for food and non-alcoholic beverages saw a bit of a cooldown, dropping to 4.4%. This was largely due to slower inflation in meat and fruit prices, along with a slowdown in the prices of fats and oils compared to last year. The overall core inflation rate, which excludes volatile items like food and energy, was steady at 3%, slightly up from April’s 2.9% but still matching market expectations. Month-on-month inflation for May was 0.3%, a decrease from April’s 0.7%.
Despite the jump in May’s inflation, the European Commission remains optimistic about Spain’s economic trajectory. They forecast economic growth of 2.1% in 2024 and 1.9% in 2025, driven by strong domestic demand and a resilient labor market. Investments are expected to flourish, supported by the Recovery and Resilience Plan. Inflation is predicted to keep trending downward, and the government deficit is set to shrink further, aided by favorable revenue developments and the phase-out of energy-related measures. As Spain looks ahead, it seems poised for a period of robust economic health, even as it navigates the occasional bumps along the road.
(Source: Agenzia Nova | Euro News)
