Spain inflation holds at 3.2% in June despite higher electricity prices

Spain’s inflation remained steady in June at 3.2% year‑on‑year, staying at historically high levels. The National Statistics Institute (INE) reported on Wednesday that the consumer price index (CPI) was 3.2% year‑on‑year, well above the European Central Bank’s 2% target, despite the recent VAT increase.

Higher electricity and gas prices offset the decline in fuel prices, which had eased after a brief truce in the Middle East that later broke down. Core inflation, which excludes volatile energy and food items, was 2.9%—a tenth of a point lower than the previous month and consistent with the INE’s preliminary estimate.

Electricity Prices Rise 6% in June Following Expiration of VAT Cut

Electricity was a major driver of inflation, rising 6% year on year in June — the second‑highest increase on record — driven largely by higher use of air‑conditioning and fans in households.

In April and May, electricity prices fell by 5.5% and 4.3% year on year, respectively, enabling the government to retain the VAT cut aimed at mitigating the economic impact of the war. Removing this measure is believed to have contributed to the June rebound in electricity prices, even as the Economy Ministry maintains that overall inflation remains stable.

Finance Minister Arcadi España García posted on X that the June CPI data confirm the effectiveness of the government’s measures. In a international context marked by uncertainty, inflation remains stable and food prices have slowed their rise to 1.9%. These figures reflect policies supporting families and businesses, as well as the promotion of renewable energy, which bolster the economy’s resilience.

The first vice‑president and economy minister, Carlos Body, argues that the figures corroborate that the government’s response plan continues to meet its objective: cushioning the impact of the war in Iran on inflation and protecting households’ purchasing power, according to sources from his department. They add that the focus on renewable energy is precisely what enables a scaling back of emergency measures from a position of strength.

Food and non‑alcoholic beverages provided some relief to the CPI, with their rise slowing to 1.9% in June — a 0.3‑point decline from May’s 2.2%.

Fuel Prices Benefit from Brief US‑Iran Truce

A brief truce between the United States and Iran eased pressure on fuel prices in June, causing them to rise more moderately despite the conflict’s resumption and the Strait of Hormuz’s limited activity.

Petrol prices increased by 1.3% and diesel by 14.1%, according to the INE. The Spanish government continues its phased withdrawal of fuel subsidies, though renewed Middle East tensions could once again exert upward pressure on oil prices.

Housing and Tourism Drive Upward Pressure on Inflation

The housing category rose to 4.7% in June, up from 1.4% in May, while transport slowed to a 5.1% increase. Restaurant and accommodation prices also saw a notable rise, with accommodation jumping 9.3% year on year.

Madrid recorded the highest provincial inflation in June at 3.8%, followed by Las Palmas at 3.6%. Conversely, Cáceres and Jaén posted the lowest rates at 2.2%. By autonomous community, Extremadura recorded the smallest price increase at 2.4%.

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