Electricity price soared 108% in Spain, driving inflation to 9.8%

The Spanish National Institute of Statistics (INE) confirmed on Wednesday the inflation data published on March 30, when its flash estimate calculated a price increase of 9.8% in March. On Wednesday, the statistical office published the details of the evolution of prices of goods and services for that period.

March was a complicated month for the Spanish economy. Added to the energy inflation caused by the Russian invasion of the Ukraine was the truckers' strike, which caused some episodes of shortages and additional price increases.

In this difficult context, the Consumer Price Index (CPI) climbed to 9.8%, a record high since 1985. Core inflation - which excludes the most volatile elements such as energy and fresh food from the calculation - also climbed 3.4%, its highest increase since 2008.

Fresh food prices rose 35.8% in March, but it was mainly energy, particularly electricity, that pushed up the annual inflation rate. There were also significant increases in the prices of fish and shellfish, legumes and vegetables, milk, cheese and eggs, and meat.

Electricity was 107.8% more expensive compared to the same month of the previous year; gasoline rose 33.6% and diesel 45.6%. The last time such a high CPI rate (9.9%) was recorded was in May 1985, when Spain was not yet a member of the European Union.

So far this year - in the January-March period - prices have increased by 7.8% on average.

Effects on salaries, pensions

Month-on-month, the rise in inflation was 3%, the largest increase in a single month since the 1970s. 

In monthly terms, electricity became 28.5% more expensive than in February and liquid fuels prices soared by 29.8%, according to the calculation published by the INE.

Employers are now very concerned about the strong rise in inflation, whose rate will mark salary and pension increases by 2023. Some of them suggest that core inflation should be used as a reference, instead of the general price index. The unions do not seem willing to give in on this matter due to the loss of purchasing power that it would entail for the salaried workers.

The Government is required by law to update pensions in accordance with the legal reform it introduced and which will force the use of the average annual inflation between December (2021) and November (2022). According to the Spanish Independent Authority for Fiscal Responsibility (AIRef) this will cause an increase in pension spending of an additional 10 billion euros.

Last week, the central Bank of Spain doubled its average inflation forecast for 2022, from the 3.5% predicted in December to 7.5% now.