Why is inflation so low in Spain? (2024)

FAQs

Why is inflation so low in Spain? ›

The Spanish government has resorted to a number of unconventional fiscal policies to slow down the increase in prices. While many countries are almost solely relying on monetary policy to control inflation, Spain is instead resorting to economic policy.

LOWER energy prices played a big part in Spain's provisional inflation rate for February dropping to 2.8%. That's a fall of 0.6% from January's figure and is the lowest inflation number in six months, according to the National Institute of Statistics. (INE).

On the inflation outlook, Spain is anticipated to see a moderation, with an average headline inflation of 3.2% for the year, slightly above the European Union's average of 3%. Spanish inflation is expected to decline to 2.1% in 2025, falling below the averages for both the European Union (2.5%) and the euro area (2%).

European Union annual inflation was 4.9% in September 2023, down from 5.9% in August. A year earlier, the rate was 10.9%. These figures are published by Eurostat, the statistical office of the European Union. The lowest annual rates were registered in the Netherlands (-0.3%), Denmark (0.6%) and Belgium (0.7%).

Data released by the national statistics institute (INE) on Thursday 14 March showed that inflation on food items for February was 5.3%, the lowest rate in two years. This drop in food prices was mainly due to the fall in the cost of pulses and vegetables (-2.7%) and milk (-1.3%) in the year-on-year rate.

Economic Survey of Spain - 25 October 2023

The economy has held up well, but public debt, which was already high, has increased because of the pandemic, making it urgent to step up the pace of fiscal consolidation.

Venezuela is the country with the highest inflation in the world, with an increase in consumer prices estimated at 360 percent in 2023, according to the latest figures from the International Monetary Fund (IMF), published in October.

As illustrated in the chart below, U.S. inflation peaked before European counterparts and further, the peak was lower. But in recent months, things have changed. Pricing pressures in Europe have eased faster than in the U.S. and there could be important investment implications from these new developments.

A closer look reveals that the composition of the underlying data in the two regions differs greatly. Increased demand has driven higher U.S. core inflation, while higher energy costs and supply chain uncertainty from the Russia-Ukraine war have had a bigger influence on European headline inflation.

Spain's consumer prices rose 1.6% in June from a year earlier. Spanish inflation slowed to below the 2% level targeted by the European Central Bank, a small victory for Frankfurt officials battling to tame cost increases across the wider euro region.

What are the top 3 countries with inflation? ›

Which countries have the highest inflation rates? The countries with the current highest inflation rates are Argentina (211%), Venezuela (189%), Turkey (64%) and Sudan (71%).

Inflation in Europe's largest economy slackened in March to 2.3%, its lowest level since June 2021. German consumer prices, harmonised to compare with other European Union countries, had risen by 2.7% year-on-year in February.

US Inflation Rate is at 3.48%, compared to 3.15% last month and 4.98% last year. This is higher than the long term average of 3.28%. The US Inflation Rate is the percentage in which a chosen basket of goods and services purchased in the US increases in price over a year.

In addition, the entire food production chain in the eurozone continues to face cost increases due to rising wages and fuel prices, making food transportation more expensive. Producers will continue to pass these on to the end customer over the coming months.

Average price

Average prices can go up or down depending on the origin of the product, the shop, the city, and many other factors. Still, it costs around €50 on average to buy food for one person for one week, which means you'd be spending about €200 a month on food.

Spain's consumer price inflation rate rose to 3.2% year-on-year in March 2024, up from February's six-month low of 2.8% and in line with with market expectations, a preliminary estimate showed. Electricity and fuel prices rose, while the cost for food and non-alcoholic beverages increased at a slower pace.

The Government of Spain has approved the new measures to alleviate inflation and protect the most vulnerable groups. The Executive has cut VAT from 4% to 0% on basic foodstuffs, agrees to a 200 euro subsidy for families with incomes of up to 27,000 euros and extends the reduction on electricity and gas taxes.

More workers searching for jobs means that firms can offer lower wages, putting downward pressure on household incomes, consumer spending and the prices of their goods and services. As a result, inflation will decrease.

Spain Inflation Rate is at 3.30%, compared to 2.90% last month and 3.10% last year. This is higher than the long term average of 2.32%.