• Tue. May 28th, 2024

Inflation in Spain Reaches 3.2% in March Following Three-Year Return to 21% VAT


Mar 27, 2024

In March, inflation accelerated by four tenths to reach 3.2% year-on-year, driven by the end of tax cuts on electricity and the return to a 21% VAT rate. This increase was higher than expected by the market consensus, with Funcas projecting a lower rate for March. Prices of goods and services in Spain were almost half a point more expensive in March compared to the previous month.

The monthly price evolution shows a continuous rise since the beginning of the year, with prices increasing by 0.8% in March compared to February, the largest increase since February 2023. The underlying inflation also rose by 0.5% in monthly terms. The provisional data released by the National Institute of Statistics suggest that the underlying inflation rate will be moderated to 3.3%, the lowest rate in the last two years.

The restoration of the normal VAT rate on electricity and the rise in gasoline are among the reasons for the increase in inflation. Services, more than goods, are driving prices up, and food products like olive oil are also experiencing significant price increases. Spain is the third country in the EU where basic food products are becoming more expensive.

The Ministry of Economy attributed the slight increase in inflation to the normalization of the tax rate for electricity and the rise in gasoline prices. Despite the continued rise in food prices, they did so less than in March of last year. Funcas warned of the inflationary pressures in services and the potential impact on salaries and margins. The overall trend indicates a strengthening of inflationary pressures in the market.

By editor

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