Spain’s Inflation Reaches 3.2% in March as VAT Returns to 21% after Three-Year Absence

In March, Spain experienced a significant increase in inflation, reaching 3.2% year-on-year. This was an increase of four-tenths from the previous month and marked a substantial rise in prices compared to February when they were only 2.8% higher year-on-year. The monthly price evolution has been on an upward trend since the beginning of the year, with prices rising by 0.1% in January, 0.4% in February, and 0.8% in March.

The provisional data released by the National Institute of Statistics suggests that underlying inflation, which excludes fresh food and energy products, will be moderated to 3.3%, the lowest rate in the last two years. Despite this decrease from 3.5% in February, core inflation is still above the general index for goods and services alike.

The increase in prices can be attributed to several factors, including the restoration of the normal VAT rate on electricity and gasoline as well as certain food products like olive oil. Services have been driving most of the price increases, but goods like gasoline have also contributed significantly to this rise in prices. However, despite these increases, food prices in March rose less than they did in the same month last year due to various factors such as weather conditions and supply chain disruptions caused by COVID-19 pandemic restrictions.

Overall, experts are warning of potential inflationary pressures in various sectors, particularly in services where costs may continue to rise due to labor shortages and increased production costs caused by supply chain disruptions.

In conclusion, while Spain’s inflation rate exceeded expectations in March due to rising fuel and electricity costs as well as increased taxes on certain goods and services like olive oil and gasoline respectively; it is expected that underlying inflation will moderate slightly over time leading to a drop from its peak levels seen earlier this year.

By Sophia Gonzalez

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