The lowest food prices in over two years were recorded in March, with a decrease of 4.3% compared to the previous year. This significant improvement from March 2023 when prices rose by 16.5% was due to cheaper legumes and vegetables, which decreased by 9.2% compared to the previous year. However, the increase in fuel and electricity costs continues to impact the overall Consumer Price Index (CPI), which rose to 3.2% in March.
The underlying CPI, excluding energy and fresh food, remained stable at 3.3%, indicating moderation in other groups influencing the index. While the overall shopping basket prices have not decreased, their rate of increase has slowed down significantly. Meat prices, for example, have increased at a slower pace than the previous year, while olive oil experienced a significant increase of 70%, becoming the highest appreciating product in the entire price index.
A significant cause of inflation has been the rising costs of fuel and electricity. Gasoline and diesel prices have increased by 3.7% and 2.8%, respectively, compared to the previous year, while VAT on electricity raised utility bills despite historically low market prices. This overall inflation trend is not unique to Spain as other European countries like Germany are also experiencing moderation in inflation rates.
Analysts are concerned about service costs such as those in the accommodation and food industry continue to put pressure on inflation rates.
The European Central Bank is considering lowering interest rates to combat weak growth and inflation rates.
While there are risks of inflation from services, the overall trend suggests a decline in inflation in the near future.
In summary, although food prices have decreased significantly in March compared to previous years due to cheaper legumes and vegetables; however, other factors such as fuel and electricity costs continue to impact overall consumer price index (CPI). Service costs such as accommodation and food industry are also putting pressure on inflation rates.
Overall trend indicates that there might be a decline in inflation rates soon despite these pressures from different sources; this could be good news for consumers looking for more affordable options but also means that businesses may need to adjust their pricing strategies accordingly.
