Spain’s year-on-year inflation report for May was released on Thursday morning, coming in at 3.6%, which was in line with market expectations, according to the National Statistics Institute. However, it was above April’s 3.3%.
This was mostly driven by increases in housing inflation, which saw a rise of 1.2 points, clocking in at 5.2%. A significant portion of this was due to electricity prices, which had reduced in May 2023, but spiked in May this year.
Transport inflation also increased to 3.8%, boosted by increases in fuel prices, which fell less in May 2024 than in May 2023. Hotels, cafes and restaurants’ inflation also inched up 0.7%. Similarly, clothing and footwear inflation jumped up 2.3% this May, driven by stronger demand for new spring-summer collections.
However, food and non-alcoholic beverages prices dropped to 4.4%, mainly due to meat and fruits inflation slowing down in May 2024 from May 2023. Fats and oils’ prices also slowed down this May compared to the previous year.
The year-on-year core inflation was 3%, in line with market expectations, but more than April’s 2.9%. On the other hand, the month-on-month inflation for May was 0.3%, which also met analyst forecasts, down from 0.7% in April.
Southern Europe could potentially be driving economic growth right now
Although Spain’s May inflation number has jumped up, this could be a minor blip, as the country is still expected to see some robust growth in the next few months by the European Commission.
On its website, the European Commission says, “Economic activity in Spain is expected to grow at 2.1% in 2024, and 1.9% in 2025, driven by domestic demand and sustained by continued labour market resilience. The implementation of the Recovery and Resilience Plan (RRP) is set to underpin investment growth over the forecast horizon.
“Headline inflation is projected to maintain its downward trend as underlying price pressures moderate. The general government deficit is set to keep decreasing, spurred by the favourable revenue developments and the phase-out of energy-related measures. The debt-to-gross domestic product (GDP) is set to gradually decline further in 2025 to 104.8%, from 105.5% in 2024.”
Currently, the biggest economies in Southern Europe which are Spain, Italy, France and Portugal, could be driving much of Europe’s growth, due to rebounds in the tourism and hospitality sectors, as well as more employment creation.
However, some effects from the pandemic still remain, such as economic uncertainty and struggling debt-to-GDP ratios in certain countries like Greece.
Valentina Meliciani, professor of applied economics at Luiss University said, as reported by Fortune, “For the four- Italy, Greece, Spain, Portugal - there are certain things that are true, such as a renewed sense of financial stability and the stabilisation of bond spreads. But when it comes to economic growth, there are some differences. Italy has not been able to stabilise its debt.”
