Spain's headline inflation held steady at 3.2% in June for the third month running, according to final data released Wednesday by the National Statistics Institute (INE). The figure remains well above the European Central Bank's 2% target, even as core inflation—which strips out volatile energy and unprocessed food—eased slightly to 2.9%, down one-tenth of a point from May.
The persistence of elevated price pressures reflects a tug-of-war between rising electricity and gas costs and a temporary dip in fuel prices linked to a brief truce between the United States and Iran. That truce has since collapsed, and renewed tensions in the Middle East are already pushing oil prices higher again.
Electricity Rebounds After VAT Cut Ends
Electricity prices jumped 6% year-on-year in June, a sharp reversal from the 5.5% and 4.3% declines recorded in April and May. The rebound coincides with the Spanish government's decision to scrap the reduced VAT rate on electricity, a measure introduced to cushion households from the economic fallout of the war in Ukraine. June was also the second warmest on record, boosting demand for air conditioning and fans.
Finance Minister Arcadi España defended the government's approach on social media, stating that the June CPI data 'confirm the effectiveness of the measures taken by the Government of Spain. In an international context marked by uncertainty, inflation remains stable and food prices have slowed their rise to 1.9%.' He credited the push for renewable energy with strengthening the economy's resilience.
First Deputy Prime Minister and Economy Minister Carlos Cuerpo echoed that view, arguing that the figures 'confirm that the government's response plan continues to meet its objective: cushioning the impact of the war in Iran on inflation and protecting households' purchasing power.' His department added that the expansion of renewables is 'precisely what is allowing emergency measures to be phased out from a position of strength.'
Food and Fuel Provide Mixed Relief
Food and non-alcoholic drinks offered some respite, with their annual price rise slowing to 1.9% in June, down from 2.2% in May. The moderation was broad-based, though prices for olive oil and fresh vegetables remained elevated.
Fuel costs fell in June after the short-lived US-Iran truce eased tensions in the Strait of Hormuz, a critical chokepoint for global oil shipments. Petrol rose by just 1.3% year-on-year, while diesel was up 14.1%. The Spanish government has been gradually phasing out fuel subsidies, but the renewed flare-up of Middle East hostilities—detailed in our analysis of oil price surges—could reverse that trend.
Housing and Tourism Drive Regional Variations
The housing component of the CPI accelerated sharply to 4.7% in June, up from 1.4% in May, reflecting higher rents and utility costs. Transport inflation slowed to 5.1%, while restaurant and accommodation prices surged 9.3% year-on-year, driven by strong summer tourism demand.
Regional disparities were notable. Madrid recorded the highest provincial inflation at 3.8%, followed by Las Palmas at 3.6%. At the other end, Cáceres and Jaén posted the lowest rates at 2.2%, while the region of Extremadura saw the smallest overall price increase at 2.4%.
The data underscore the uneven impact of inflation across Spain's diverse economy, with tourism-heavy areas and major cities facing steeper cost increases. As the government navigates the phase-out of emergency measures, the stability of headline inflation—even at an elevated level—provides some breathing room, though the ECB's target remains distant.
