View of a stall with fruit and vegetables in a market in Madrid, in the middle of the month.
View of a stall with fruit and vegetables in a market in Madrid, in the middle of the month.JAVIER LIZON (EFE)

Inflation eases in May and is close to a two-year minimum. The Consumer Price Index (CPI) has fallen nine tenths this month, to stand at 3.2% year-on-year, from 4.1% in April, according to advance data published by the National Institute of Statistics (INE). this Tuesday. It is the lowest rate in 22 months, since July 2021, when it stood at 2.9%. The drop in electricity and fuel prices, which increased in May of last year, explain the moderation.

Despite the moderation in gasoline and diesel prices, underlying inflation (general index excluding unprocessed food and energy products) fell five tenths to 6.1%, somewhat better than expected by analysts who anticipated a rate close to 6.4%. It is, however, still a high figure and indicates that the moderation of prices at more bearable rates for the economy is still far from being consolidated.

Consumer prices registered their first moderation in the monthly rate in May since January, which fell 0.1% compared to April, according to the leading indicator of the CPI.

Belen Trincado Aznar

In addition to the drop in fuel, the INE explains that it influences, although to a lesser extent, that the rise in the prices of food and non-alcoholic beverages has been less than in May 2022.

For its part, the harmonized CPI (IPCA) registered a variation rate of 2.9%, nine tenths lower than that registered the previous month.

The First Vice President of the Government, Nadia Calviño, has indicated that the moderation of inflation in May “confirm the effectiveness” of her measures. The rate, says Calviño, places Spain as one of the countries with the lowest inflation in the European Union. “Inflation in Spain is already around 3% and even below, if we take the CPI harmonized with Europe,” she said in a statement.

step effect

The known inflation figures that will be known over the coming months will be affected by the so-called step effect, which is nothing more than the impact generated, in year-on-year calculations, by comparing the data for one year with that of the same year. month of the previous year. This year’s CPI figure is compared to the figure registered in 2022 whose prices were strongly affected by the war in Ukraine, which in general terms will be reflected with a decrease in this year’s data as happened last March and it is likely to happen in June after the significant rise registered in 2022.

It could also occur in the opposite direction and that the step effect would raise the inflation rate. For this reason, everything points to a high volatility in inflation, which, apart from the uncertainty due to the war, is facing the evolution of food prices and waiting to know the effects of the drought.

The optimistic Bank of Spain

The general director of Economy and Statistics of the Bank of Spain, Ángel Gavilán, affirmed this Tuesday that the organism will revise downward its inflation forecast for this year, from the current 3.7% to “close to 3%”. Gavilán announced it in his speech at a round table at the Cercle d’Economía Meeting organized in Barcelona. He pointed out that “in recent months we have been surprised by the behavior of energy prices”, which has relaxed, which will mean that “we will surely revise average inflation downwards for 2023 ″.

The Bank of Spain will announce its new macroeconomic projections next month, in which it will include this change with respect to the last ones published in March. “From the end of 2023 and during 2024 we estimate that inflation will pick up due to a purely mechanical effect” due to the completion of measures such as the reduction in VAT on electricity and gas.

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