Spain’s inflation rate closed the year at 2.8% in December, marking a four-tenths increase from November. While inflationary pressures have eased compared to earlier highs, the rising cost of fuel and other factors continue to drive prices upward. Here’s a breakdown of what this means for households and businesses.

Inflation Trends in 2024

The year ended with an average inflation rate of 2.9%, a noticeable drop from the 3.6% recorded in 2023. Despite this moderation, December marked the third consecutive month of rising prices, starting from September’s low of 1.5%. The primary contributors to December’s increase were increased fuel prices and higher costs in leisure and cultural activities.

Experts have highlighted that while the December figures are higher, they don’t necessarily signal a return to runaway inflation. Factors such as the depreciation of the euro against the dollar and resilient service prices pose challenges to achieving the European Central Bank’s (ECB) 2% inflation target.

Core Inflation on the Rise

Core inflation, which excludes volatile items like energy and fresh food, reached 2.6% in December, up from 2.4% in November. Though this figure is significantly lower than the 3.8% recorded at the end of 2023, the trend highlights ongoing price pressures in areas like housing and everyday goods.

Impact on Households and Policy

The cost of living for households remains a concern, especially as VAT reductions on essential goods like bread, milk, and eggs are phased out in 2025. Rising housing costs, including energy bills, further strain budgets. The ECB has begun cautiously reducing interest rates, but experts warn of potential global economic uncertainties impacting Spain.

What Lies Ahead?

Forecasts for 2025 suggest continued moderation in inflation, with estimates ranging from 1.9% (IMF) to 2.2% (European Commission). Although these figures suggest a more stable future, households, and businesses still need to adapt as Spain moves away from emergency measures to long-term plans.