Inflation in Spain Reaches 3.2% in March Following Three-Year Return to 21% VAT

Shocking Inflation Spike in Spain: March 2023 Trends and Insights

In March, Spain experienced a sharp increase in inflation, reaching 3.2% year-on-year. This was driven by several factors, including the end of tax cuts on electricity and the return to a 21% VAT rate. The increase in prices was higher than expected by market consensus, with Funcas projecting a lower rate for March.

The monthly price evolution showed a consistent rise since the beginning of the year, with prices increasing by 0.8% in March compared to February, marking the largest increase since February 2023. The underlying inflation also rose by 0.5% in monthly terms. Provisional data released by the National Institute of Statistics suggests that the underlying inflation rate will be moderated to 3.3%, which is the lowest rate in the last two years.

One of the primary reasons for the increase in inflation is the restoration of the normal VAT rate on electricity and gasoline price rise. Services are driving up prices more than goods, and food products like olive oil are also experiencing significant price increases. Spain is now one of the third countries in Europe where basic food products are becoming more expensive.

The Ministry of Economy attributed this slight increase in inflation to several factors such as normalization of tax rate for electricity and rise in gasoline prices despite continued rise in food prices, they did so less than in March of last year.

Despite this trend, Funcas warned about inflationary pressures building up in services and their potential impact on salaries and margins.

Overall, this indicates a strengthening of inflationary pressures in Spain’s economy, which could have implications for businesses and consumers alike moving forward.

This article presents an overview of how Spain’s inflation accelerated sharply during March due to various factors such as normalization of tax rates for electricity and gasoline price rises among other things.

The article highlights how this increase was higher than expected by market consensus with funcas projecting a lower rate for March.

Furthermore it shows how services were driving up prices more than goods with food products like olive oil experiencing significant price increases.

Additionally it mentions how spain is now one of third country’s where basic food products are becoming more expensive.

Finally it describes how ministry attributed this slight increase to several factors while funcas warned about inflationary pressures building up in services which could have implications on salaries and margins moving forward .

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