INFLATION in the Eurozone has fallen slightly, but is still more than double that of Spain – the common-currency nation with the third-lowest rate.
The European Central Bank (BCE) in Frankfurt, Germany. Its decisions on interest rates affect everyone who uses the common currency (photo: EFE)
According to the continent-wide statistics agency, Eurostat, inflation across the countries which use the euro fell from 7% to 6.1% in May, the most recent full month for which figures are available.
But Spain's own inflation rate is dramatically lower – in fact, after Belgium and Luxembourg, is the most reduced figure in the Eurozone.
As at the end of May, inflation in Spain was 2.9%, meaning residents are not suffering price increases to the same extent as those in their neighbouring countries.
Even at its 2023 peak – in April – Spain's rate of inflation was much lower than the Eurozone average is now, at 3.8%.
It does not mean consumer prices have come down – just that they have stopped rising, according to the Bank of Spain.
Only Belgium, at 2.7%, and Luxembourg, at 2%, have lower inflation than in Spain at present.
Meanwhile, Germany and Italy far exceed the Eurozone average, at 6.3% and 8.1% respectively, and France is only just below the across-the-board figure, at 6%.
Lithuania and Slovakia are experiencing the toughest time with living costs, dealing with inflation rates at above 12%.
What has triggered the inflation slowdown
Lower inflation rates in the Eurozone are not entirely due to rising interest, however. Eurostat says falling energy costs – now 1.7% lower than a year ago – are partly responsible.
Reduced prices of transport fuel, electricity and gas have also helped slow inflation in food and other consumer goods.
Although still 9.6% more expensive on average than in May 2022, food price inflation has fallen from the 13.5% seen in April this year.
It's been many years since petrol and diesel were this cheap in Spain – but even though motor fuel is around 60% more expensive in 2023, prices have fallen, helping reduce inflation (photo: EFE)
As a result, underlying inflation – which excludes the effect of price-volatile commodities such as energy and non-processed food – has shrunk from 5.6% in April 2023 to 5.3% in May, down 0.4 percentage points from its record high in March of 5.7%.
Food prices have not all risen by a standard 9.6%. Shoppers in Spain have noticed that, whilst a very small number of items are no more expensive than in 2021, a significant proportion are now a third more expensive, with costs in some cases soaring by 50% or even 100%.
Spain's government acted earlier this year to cut value-added tax (IVA) on staple food items to zero, meaning that although most of these are now around 40% more expensive than in 2021, their prices have not risen for several months.
Euribor rates still rise, even as inflation falls
All this said, and despite the USA's Federal Reserve having opted to cut interest rates and the Eurozone's having entered into 'technical recession', the European Central Bank (BCE) has upped its own rates again.
Now rising from just above 3% to over 4%, the Euribor – or Eurozone interest rate – is at its highest since 2008.
And the BCE has hinted the latest hike might not even be the last.
A year ago, the Euribor was still in minus figures, meaning mortgage repayments across the common currency area have soared.
Increasing interest rates is the standard response to controlling inflation, and during the six years the Euribor was below zero, Eurozone inflation still needed to rise.
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