Spanish inflation dips below 2%

Inflation in Spain eased to 1.9% last month, official data showed on Thursday, making it the first Eurozone country to see the rate drop below the European Central Bank’s target of 2%.

Spain’s National Statistics Institute said its flash estimate for the consumer price index was 1.9% year-on-year in June. That was down notably on May’s 3.2% although it was marginally ahead of consensus, for 1.7%.

The institute attributed the annual decline to fuel, electricity, food and non-alcoholic beverage prices being lower than they were in June 2022.

The annual rate of core inflation – which strips out the more volatile elements of energy and unprocessed food – also fell, however, to 5.9% from 6.1%.

The harmonised consumer price index was also lower, at 1.6%. All European Union countries use the same methodology to calculate HCPI.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “Disinflation continued in June, and outright deflation is now within touching distance. The decline was primarily driven by lower energy inflation, but the national core rate dipped too.”

On Wednesday, official data showed a sharp decline in Italian inflation, with the annual headline rate coming in at 6.4%, down from 7.6% in May. Germany is set to publish its inflation data later on Thursday, while figures from France and the Eurozone are due on Friday.

Pantheon Macroeconomics is forecasting Eurozone inflation to fall by 0.4 percentage points in June, to 5.7%. It expects core inflation to nudge higher, however, by 0.2 percentage points to 5.5%.