Spanish inflation nearly halves in March

Spanish inflation fell significantly in March as energy prices declined, according to data released on Thursday by the country’s National Statistics Institute.

Headline inflation eased to 3.3% year-on-year from 6% in February. This was below consensus expectations of 3.8% and marked the lowest annual rate since August 2021.

Meanwhile, the harmonised index of consumer prices (HICP) also fell, to 3.1% year-on-year from 6% in February.

The drop was attributed mostly to a decline in gas and electricity prices.

The figures also showed that core inflation ticked down slightly to 7.5% in March from 7.6% in February - the first decline in 23 months.

ING said the drop in core inflation was "encouraging". It shows "that despite the sharp fall in headline inflation, inflationary pressures in the economy remain very high, but it is also a sign that the pass-through of higher energy prices into higher consumer prices is starting to lose strength".

"Moreover, pressures on global supply chains have further eased in recent months to pre-pandemic levels, which is also dampening inflation," said economist Wouter Thierie.

"We expect headline inflation to cool further in the coming months, mainly thanks to a reduced contribution from the energy component. Energy inflation has been negative since the beginning of the year and will continue to put downward pressure on inflation rates," he said.