Inflation cooled in June, slowing to 1.9% and marking the lowest level since April 2021, after a 3.2% reading in May. The nationwide consumer price index (CPI) data from the National Institute of Statistics, INE, show prices rising 0.6% from May to June, and the annual pace remains well below last year’s figure of 1.9%.
INE notes that the gains in fuel, electricity, food, and non-alcoholic beverages grew more slowly in June than they did in the same month a year earlier, a factor that helped push the annual inflation rate downward.
The drop in the year-over-year CPI by 1.3 percentage points was welcomed by the government, with Spain standing out as the first major European economy to report an inflation rate under 2%. The European Central Bank’s reference framework continues to rank Spain among the EU’s lowest-inflation nations. A year earlier, in June 2022, the CPI had surged by 10.2% due to the impact of the war in Ukraine.
Administrative authorities attribute the recent trend to policy measures such as the temporary VAT exemption on basic food products, including bread, flour, milk, cheese, eggs, fruit, vegetables, legumes, tubers, and grains, as well as a reduction in the VAT on pasta and oils from 10% to 5%. Officials say these steps helped reduce inflation by almost 9 percentage points in less than a year, bringing it to 1.9% in June and marking the lowest rate since June 2021.
Core inflation, which excludes energy and unprocessed foods, also eased, though it remained elevated at 5.9% in June after a 0.5% move higher in May. The ongoing moderation in prices suggests the shopping basket continues to cool, though the decline in core inflation was not as rapid as the overall CPI. A forward view indicates the trend should solidify around mid-next month, pending data confirmation.
Price growth in the shopping basket moved lower again in May, with a roughly one-point decrease for the third consecutive month, while still staying in double digits at around 12%. This pattern mirrors broader progress in consumer costs, even as inflation remains above target levels in many households.
As these dynamics unfolded, the annual rate fell to 3.2%, the lowest in nearly two years, with the harmonized index used for cross-country comparisons printing 2.9%. This positioned Spain among the EU members with the lowest inflation. The trajectory also supported a downward revision of forecast figures. Core inflation rose to 6.1% in the period.
The evolving inflation picture widened the gap from the 10.8% peak hit in July of the previous year, and the core inflation rate has also receded from a February high of 7.6%. These shifts reflect changes in pricing pressures across categories, with families feeling the impact most in essential goods.
INE’s Family Budget Survey shows that rising prices for basic necessities caused households to spend about 8% more than the previous year, a jump that marks the highest increase in 15 years. In response, the government has continued pursuing measures like maintaining VAT exemptions on essential items to cushion families from price shocks.
The price trend has also prompted the European Central Bank to tighten monetary policy, with interest rates climbing from 0% a year ago to 4% and staying at that level since last July.
loans and mortgages
The backdrop of easing inflation and higher borrowing costs has influenced credit demand and the mortgage market, particularly for variable-rate loans tied to Euribor. The daily Euribor rate has moved higher and is approaching the 4% mark, a level not seen at the start of the 23-year data series.
According to Bank of Spain estimates, roughly 2.77 million of the 3.7 million people holding floating-rate mortgage loans are affected by these trends, notably those with adjustable-rate products.