Spain’s Inflation Reaches 3.2% in March as VAT Returns to 21% after Three-Year Absence

Surprising Rise in Spain’s Inflation Rate: What Factors are Driving the Increase and How Might it Impact Consumers?

In March, Spain’s inflation rate accelerated to 3.2% year-on-year, a significant increase from the previous month. This was driven by several factors, including the end of tax cuts on electricity and the return to a 21% VAT rate.

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 is the largest increase since February 2023. The underlying inflation also rose by 0.5% in monthly terms.

Despite these increases, food prices in March rose less than they did in the same month last year, thanks to certain food products like olive oil driving down prices slightly. However, services have been driving most of the price increases, along with gasoline and other fuel products.

According to provisional data released by the National Institute of Statistics, underlying inflation is expected to moderate to 3.3%, which would be the lowest rate since February 2023 and below recent expectations for core inflation (excluding fresh food and energy products). Despite this news, experts are still concerned about potential inflationary pressures in various sectors, particularly services like housing and transportation.

Overall, while there were some positive signs regarding core inflation in March compared to recent months, overall price increases continued to outpace expectations due to various factors such as tax cuts ending and rising fuel prices.

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