In March, Spain experienced a significant increase in inflation, as prices rose by 3.2% year-on-year. This was a 40% jump from the previous month and marked a significant rise compared to February when prices were only 2.8% higher year-on-year.
The monthly price evolution has been on an upward trend since the beginning of the year, with prices rising by 0.1% in January, 0.4% in February, and 0.8% in March. This represents the largest increase since February 2023. The underlying inflation also rose by 0.5% in monthly terms.
According to provisional data released by the National Institute of Statistics, the underlying inflation rate is expected to moderate to 3.3%, which is the lowest rate in two years. This is a drop from the recent high of 3.5% in February and marks the first time since 2022 that core inflation is above the general index.
The increase in prices was driven by several factors, including the restoration of the normal VAT rate on electricity and a rise in gasoline prices. Services have been driving most of the price increases, along with certain food products like olive oil.
Despite these increases, food prices in March rose less than they did in March last year due to various factors such as weather conditions and supply chain disruptions caused by geopolitical tensions.
Overall, experts warn of potential inflationary pressures in various sectors, particularly services such as housing and transportation, which are currently facing rising costs due to supply chain issues and labor shortages.
Inflation rates are closely monitored by policymakers and investors alike as they can impact economic growth and stability. If inflation continues to rise at an unsustainable pace or becomes entrenched at high levels for an extended period, it could lead to macroeconomic instability or even recessionary conditions.
As such, it will be important for policymakers to continue implementing measures aimed at addressing inflationary pressures while also ensuring that they do not stifle economic growth or hurt consumers through excessive taxation or regulations.