Spanish inflation slightly down in August

Spanish inflation fell to 10.4% year-on-year in August from 10.8% in July, driven by a drop in fuel prices. But core inflation is still rising, suggesting that a downward inflation trend will be at best very gradual

Spanish inflation dropped to 10.4% year-on-year thanks to a drop in fuel prices

Spanish inflation decreased to 10.4% year-on-year in August from 10.8% in July, according to data released this morning by the National Institute of Statistics. The drop is mainly driven by a decrease in fuel prices. Core inflation, excluding the more volatile food and energy prices, however, rose to 6.4% year-on-year in August from 6.1% last month. On a monthly basis, prices rose by 0.1% in August, compared with a -0.3% decline in July. Although the component breakdown is not available yet, the statistical office confirmed that electricity and food prices have continued their upward trend.

Despite the gas price cap, electricity prices continue to go up

From mid-June, Spain and Portugal set a price cap on gas for power production. Through this measure, the two Iberian countries aim to bring the total energy bill down by decoupling the price of gas and electricity. Although the measure moderated price increases, it didn’t succeed in bringing them down. The gas price cap has also had the undesired effect of reducing the attractiveness of other energy sources, leading to an increased dependence on gas. According to network operator Enagas SA, gas demand was 126% higher in July compared with the same month last year. On top of that, electricity prices have been further impacted by the drought and heat waves in the country. Hydropower plants ran last week at only 37% of their total capacity due to the low water levels.