Staircase effect takes Spanish inflation to 1.9, with core inflation at 5.9%

precios inflacion

Funcas| The CPI rose by 0.6% in June, well below the 1.9% increase recorded in the same month last year, which has cut the year-on-year inflation rate by 1.3 percentage points to 1.9%. Inflation remains below 2% for the first time since March 2021. Core inflation moderated to 5.9%.

The decline in the headline inflation rate was mainly due to the pass-through effect in energy products. Recent months have also seen a moderation of inflationary pressures in food, taken as a whole, but a maintenance in services, while in non-energy goods the trend is unclear.

The stability of oil and gas prices in recent weeks has led Funcas to maintain its inflation forecasts. The estimate for the annual average remains at 3.9% this year and 3.4% next year, with year-on-year rates of 5% and 1.5% in December 2023 and December 2024, respectively. The June result would be the annual low and from next month the headline rate would return to above 2% to gradually converge towards the underlying rate.

These forecasts do not include the impact of the withdrawal of measures introduced in response to the energy crisis – such as the reduction of VAT on electricity and some basic foodstuffs and the subsidisation of public transport. By the time the measures are withdrawn, the annual rate could rise by around 0.3 percentage points.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.