Inflation in Spain accelerated again in July, reaching 3.5% year-on-year, up three-tenths of a percentage point from June, according to the flash estimate released Thursday by the National Statistics Institute (INE). The increase was primarily driven by higher prices for fuel, lubricants, and electricity, which rose more sharply than in the same month last year. This marks the highest inflation rate since May 2024 and the fifth consecutive month that the rate has remained above 3%.
The INE attributed the rebound to base effects: both fuel and electricity costs increased more in July 2025 than they did in July 2024. Underlying inflation, which strips out volatile unprocessed food and energy prices, also ticked up by one-tenth of a point to 3%, suggesting that price pressures are broadening beyond the energy sector.
Harmonised index and European context
The Harmonised Index of Consumer Prices (HICP), which allows for comparison across European Union member states, placed Spain's annual rate at 3.8% in July, two-tenths higher than in June. This divergence from the national measure reflects differences in methodology, particularly regarding owner-occupied housing costs.
Spain's inflation remains above the European Central Bank's 2% target, but the government in Madrid has pointed to measures already in place to cushion the impact. The Ministry of Economy argued that policies adopted to address the economic fallout from the conflict with Iran are still in effect and are helping to contain the effect of higher energy costs on both inflation and household purchasing power.
The rise in Spanish inflation comes as the eurozone as a whole continues to grapple with persistent price pressures, though the pace varies widely among member states. The ECB has kept interest rates at elevated levels, and the Federal Reserve's recent decision to hold rates steady amid its own inflation concerns underscores the global dimension of the challenge.
Meanwhile, Spain has also been contending with severe wildfires this summer, which have strained resources and highlighted the intersection of climate and economic policy. The government recently established a scientific panel to guide climate policy as the country faces more frequent extreme weather events.
Despite the inflationary uptick, Spain's economy has shown resilience, with tourism and exports performing strongly. The country's labour market has also remained relatively robust, though rising living costs continue to squeeze households, particularly those with lower incomes.
Analysts will be watching the August data closely to see whether the July spike is a temporary blip or the start of a more sustained upward trend. The ECB's next policy meeting in September will be informed by these figures, as well as by broader eurozone inflation readings.
