The National Statistics Institute released Spain's year-on-year inflation report for May on Thursday morning, revealing a rate of 3.6%, matching market expectations, and an increase from April's 3.3%.

This increase was predominantly due to a 1.2-point rise in housing inflation, reaching 5.2%. Yet a significant factor was the surge in electricity prices, which had decreased in May 2023 but rose sharply in May this year.

Additionally, transport inflation rose to 3.8%, driven by higher fuel prices, which declined less in May 2024 compared to May 2023. Inflation for hotels, cafes, and restaurants edged up by 0.7%. Similarly, clothing and footwear inflation increased by 2.3% this May, fuelled by higher demand for new spring-summer collections, Euro News reports.

However, prices for food and non-alcoholic beverages edged down to 4.4%, primarily because the inflation rates for meat and fruits slowed down in May 2024 compared to May 2023. In addition, prices for fats and oils also saw a reduction this May compared to the previous year.

Year-on-year core inflation was 3%, aligning with market expectations but slightly higher than April's 2.9%. Conversely, month-on-month inflation for May stood at 0.3%, meeting analyst forecasts but down from April's 0.7%.

According to the European Commission: “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.”