Spain CPI Drops to 1.9% in May: Core Inflation Remains Above ECB Target

Spain’s economic landscape saw a notable shift in May as inflationary pressures continued to ease, marking a significant step towards price stability. While the headline consumer price index registered a welcome decline, reaching its lowest point in several months, underlying inflationary trends present a more persistent challenge, remaining above the European Central Bank’s target.

Key Inflation Metrics

The National Statistics Institute (INE) reported that Spain’s Consumer Price Index (CPI) decreased to 1.9% in May, marking its lowest point since October of the previous year (1.8%). The Harmonised Index of Consumer Prices (HICP) similarly dropped by 0.3 percentage points year-on-year to 1.9%, with a monthly decrease of 0.1%. This signifies the third consecutive month of moderation in Spain’s annual inflation rate.

The Underlying Challenge

Despite the overall slowdown, the underlying inflation index, which excludes volatile items like energy and unprocessed food, persisted at 2.1%. This core rate remains above the European Central Bank’s (ECB) medium-term target of 2% for price stability across the Eurozone. While the overall CPI normalizes from past highs, the stubbornness of underlying inflation remains a key concern for policymakers.

Factors Behind the Decline

This deceleration is largely attributed to reduced prices in leisure and culture, lower transportation costs, and a smaller year-on-year rise in electricity tariffs. The Ministry of Economy, Trade and Enterprise highlighted the significant role of a robust tourism sector and favorable electricity price trends in contributing to this overall disinflation. Notably, the underlying inflation rate appears to be moderating again after a 0.4 percentage point rise observed in April.