Alex Trelinski
SPAIN’S annual inflation rate went up by 0.3% to 3.6% in May, mainly due to higher electricity prices and increased costs for tourism services.
The National Institute of Statistics said on Thursday that its the biggest monthly rise in inflation since April 2023.
Experts believe the rate will not reach the European Central Bank’s target of 2% this year, but it will moderate and close the year at levels lower than in 2023, which had an average rate of 3.5%.
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The annual rate of change in core inflation, which excludes unprocessed food and energy products, rose by 0.1% in May to 3%.
The restoration of VAT to electricity bills in February has been working its way through the system and may have impacted on the general inflation rate.
There has also been a rise in holiday package prices, air fares, and tourist accommodation.
The Ministry of Economy, Trade and Business said in a statement: “Inflation in recent months has remained stable which has improved the purchasing power of families- which has recovered to pre-pandemic levels- and to maintain the competitiveness of Spanish companies.”
“All this in a context of growth in the Spanish economy, which is higher than the average for the euro zone,” the ministry continued.
A fresh inflation challenge for the government will be the scheduled end in June of the VAT cut applied to basic food products since the start of 2023.
Goods like bread, eggs, fruit and vegetables, saw the VAT rate cut from 4% to zero, while oil and pasta had tax reduced from 10% to 5%.
