The drop in fuel prices, the moderation of food and the base effect compared to the same month last year have made it possible to reduce inflation in May to 3.2%, its lowest level since almost two years ago. You have to go back to July 2021 to find a lower inflation rate. They are nine tenths less than in April and, after last month's recovery, confirm the trend towards moderation.
To be exact, gasoline prices are falling while in May of last year they were rising, and as for food, prices are still rising, but less than then. The advanced data provided yesterday by the National Institute of Statistics (INE) is 3.2% year-on-year, which is a long way from the figures with which we started in 2023 and which, according to all forecasts, continues to decrease up to 2% in June. However, after the summer it will rise again.
The basic explanation for this volatility must be found in the so-called base effect, the comparison with the prices of the same month last year to establish year-on-year inflation. The war in Ukraine at the end of February 2022 caused a sharp escalation in energy prices, with strong fluctuations between one month and the next.
"Inflation has fallen due to the cascade effect in energy products. Last year there was a lot of volatility in energy products and when making the year-on-year comparison, this moderation occurs. In June it may be below 2%, although it will rise again later", explains María Jesús Fernández, from Funcas. It is the trend that economists point to after today's data, a trend that the inflation rate will be reduced until June. "Inflation is falling in line with what is expected, due to the favorable effect of energy prices. We should see how inflation continues to fall in the coming months below 3% or even 2%, but it will pick up again towards the end of the year", says Ángel Talavera, from Oxford Economics.
On the other hand, core inflation, which does not take into account energy or fresh food, has also moderated, although it remains at high levels, at 6.1%, which is half a point below d 'April. It is the third consecutive month that core inflation has moderated. The economist Ángel Talavera believes that this moderation is probably due to the fall in the prices of processed foods, since "the prices of services will remain high during the summer season".
"Inflation in Spain is already around 3% and even lower, if we take into account the CPI harmonized with Europe. The inflation data for May confirm the effectiveness of the Spanish Government's measures, the moderation of food prices and the drop in fuel positions our country as one of those with the lowest inflation in the European Union", he stated the first vice-president and Minister of Economy, Nadia Calviño.
Although the INE does not disaggregate inflation data with the advanced indicator, it does point to a moderation in food prices. Everything indicates that they reached their maximum in February, with an increase of 16.7%, although the moderation is and will be slow. We have to wait for the delayed effect with which the reduction in the price of energy is transmitted through the production chain in the food industry.
It is based on these inflation data that the Spanish Government must decide in the coming days whether to extend the measures in force against inflation, such as the reduced VAT on some foods. These are decisions that he has to take due to pressure from Brussels, which demands that Spain, in view of the re-establishment of fiscal rules, gradually withdraw aid to fight inflation so that, in this way, it can reduce a very high debt.
