Inflation drops in the eurozone to 2.4% in March, but in Spain it rebounds to 3.3% due to the increase in VAT on electricity
Prices have provided some relief for consumers in the eurozone in 2024. In March, inflation moderated for the third consecutive month to 2.4% in the eurozone, according to data from Eurostat. However, Spain’s inflation rate diverged from the eurozone average due to the end of the reduction in VAT on electricity. In Spain, inflation rose to 3.3% in March, moving further away from the European average.
The CPI variation rate in the eurozone fell by two tenths in March compared to February, equaling the lowest rate since July 2021. In the European Union as a whole, average inflation also moderated by two tenths to an interannual rate of 2.6%, the best figure in over two and a half years. These figures confirm the decrease in prices compared to a year ago when inflation rates were much higher.
On the other hand, Spain experienced a four-tenths increase in inflation in March, mainly due to the rise in VAT on electricity. This increase made electricity more expensive after almost three years of reduced rates to alleviate the impact of the crisis on households. When excluding the impact of energy and food, alcohol and tobacco prices, Spain’s inflation rate moderated to 3.1% in March, slightly above the eurozone average of 2.9%.
Despite the recent acceleration in inflation, Spain’s inflation rate remains below the level at the beginning of the year. In January, the CPI recorded an annual variation rate of 3.5%, after a VAT increase on electricity to 10%. The inflation rate in Spain has been above 3% since September, except for February when it was 2.9%.
The CPI for food decreased in Spain and the eurozone as a whole. At the national level, the inflation rate for food reached its lowest figure since November 2021, while the European average stood at 1.8% in the eurozone and 1.2% in the EU as a whole.
Spain had the highest inflation rate among large EU economies in March, while France, Germany, and Italy experienced lower CPI variation rates. Lithuania, Finland, and Denmark had the lowest inflation rates, while Romania and Croatia had rates above 4.5%.
Most European countries are moving towards the ECB’s 2% inflation target, and the central bank is maintaining interest rates at their highest level in order to control price increases. The IMF has warned that geopolitical conflicts could disrupt price containment and delay interest rate cuts, potentially impacting economic growth.