Inflation in Spain drops sharply to 3.3% in March

March inflation data for Spain was published yesterday (Thursday) and it was surprisingly good news with the annual consumer price index (CPI) plummeting to 3.3%, down from 6% in February.

This drop is being put down to a so-called ‘step effect’, which does not mean that prices have eased to any great extent since last month, but rather, when comparing this March, to March last year when war broke out in Ukraine and energy and raw material prices increased, prices then soared virtually overnight.

In March 2022, inflation rose to 7.6% and from that point onwards continued upwards until reaching a peak of 10.8% in July.

The government’s national statistics institute (INE) attributes the slower growth in prices to the recent fall in the cost of electricity and fuel, compared with the rise in the same month last year, and the government minister for Economic Affairs, Nadia Calviño, had already predicted that inflation would slowdown in March.

In a statement from the Ministry for Economic Affairs, they say that the “sustained” drop in the price of electricity from measures adopted by the government to contain prices have been “key factors for Spanish inflation being among the lowest in Europe”.

However, underlying annual inflation, which doesn’t take into account fresh produce or energy, remains almost identical to February, down only one-tenth of a percentage point at 7.5%, which is one of the highest rates ever.

The INE data did not reveal which products have become more expensive, but that information that will be available in two weeks’ time. This will show whether the sales tax decrease (IVA/IGIC) on certain essential foods is having its effect in the third month since it came into effect, which the government is still backing despite some studies showing it is having little or no effect.

The latest data available for the month of February points to a 16.6% annual rise in food prices, with fruit and vegetables topping the list.