Spain | Looking past the inflationary surge in 2021

For the first time in nearly a decade, Spain will see inflation average over 2% this year. Indeed, in the final months of the year, consumer prices could hit 3%. But beyond this year’s surge in prices, we still anticipate the medium-term inflation outlook to be moderate.

What you will learn:

• A rise in energy prices is common across Europe but the impact is particularly acute in Spain, where it’s driving around 75% of the inflationary surge. In particular, soaring electricity prices, up 40% from last year, are dominating inflation dynamics at the moment.
• So far, core inflation has remained close to zero. But we expect underlying price pressures to rise substantially toward the end of the year, partially driven by base effects.
• Beyond this year, however, we struggle to see evidence for a sustained rise in core inflation given the amount of slack in the economy.