Spanish Inflation Quickens as Government Energy Aid Removed

(Bloomberg) — Spanish inflation accelerated for a second month as the government continued to remove support that had helped keep a lid on soaring energy costs.

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Consumer prices rose 3.4% from a year earlier in April, data published Monday showed. That’s in line with the median estimate in a Bloomberg survey of economists.

Stripping out energy and some food costs, core inflation dipped more than anticipated to 2.9% — the lowest level since early 2022.

Spanish numbers kick off a raft of data across the euro area, with German inflation later Monday also projected to quicken a touch. The region as a whole is expected to see a reading of 2.4%, holding steady for the first time this year, though a Bloomberg Economics nowcast model suggests it could dip to 2.3%.

The European Central Bank has cautioned that the gauge will fluctuate in the coming months as base effects kick in. That won’t stop policymakers from cutting interest rates at their next meeting in June, though what happens after that is up in the air.

What Bloomberg Economics Says…

“The downward trajectory of Spanish price gains has been bumpy this year and another increase is likely in May, driven by base effects. After the spring, however, inflation should resume its easing trend more firmly.”

—Ana Andrade, economist. Click here for full REACT

For Spain — where the government has been rolling back some subsidies — this week’s economic data, which also includes first-quarter output, is taking a backseat to the political drama unfolding in Madrid.

Prime Minister Pedro Sanchez will announce at 11 a.m. on Monday whether he wants to remain in his job. Should he indeed decide to exit, that raises the possibility of a new general election.

–With assistance from Joel Rinneby and Alexander Weber.

(Updates time of Sanchez announcement in final paragraph.)