Inflation in Spain slows eight weeks before legislative elections

Inflation in Spain slowed down notably in May to stand at 3.2% year-on-year, thanks mainly to the drop in fuel prices, according to a provisional estimate published on Tuesday by the National Statistics Institute (INE).

This figure, which still needs to be confirmed, is 0.9 points lower than that of April (4.1%), when inflation registered a rebound, and 0.1 points lower than that of March (3.3%).

The new decrease moves Spain a little more from the peak of 10.8% that it reached in July, while it approaches the 2% target set by the European Central Bank, when there are less than two months left for the legislative elections called for 23 of July.

The slowdown in May is explained, according to the INE, by the drop in fuel prices and, to a lesser extent, by a lower rise than in the same month last year in food prices.

The harmonized consumer price index (IPCA), which allows comparisons with other countries in the euro zone, stood at 2.9%, which is 0.2 points below April (3.1%).

Core inflation, which does not take energy prices into account and corrects for seasonal variations, fell 0.5 points to reach 6.1% in one year.

This dynamic confirms thedownward trend” of inflation, as highlighted in a note by the ING bank, which attributes part of this dynamic to the measures adopted by the progressive Spanish government in recent months.

aid package

The government headed by the socialist Pedro Sánchez multiplied its budgetary measures to maintain the purchasing power of households, strongly affected by inflation that reached an average of 8.4% last year.

The executive announced at the end of December the abolition of VAT on basic food, as part of an aid package of 10,000 million euros (about US$ 10,700 million), aimed at containing the escalation of food prices.

This provision brought the total amount of the measures adopted by the Sánchez government for more than a year to almost 50,000 million euros.

With this 3.2% figure, Spain is in a more comfortable position than most of its neighbors in the euro zone, where inflation reached 7% year-on-year in April.

“The social democratic measures work and benefit the social majority of this country. That’s what the far right can’t stand”, Sánchez wrote on his Twitter account.

The slowdown in inflation is one of the arguments that his executive usually uses to deal with discontent over the drop in purchasing power. This would be, according to analysts, one of the factors that influenced the defeat of the Socialist Party and its allies in the municipal and regional elections on Sunday.

The poor results for the progressives, in favor of the right, led Sánchez to surprise Monday with the call for early legislative elections for July 23, from which the new Parliament and the new government will emerge, and that the conservatives of the Popular Party (PP) and the far-right party Vox appear to be in a position of strength.