Spanish inflation rose to 4.1% in April after falling sharply to 3.3% in March. Meanwhile, core inflation decreased to 6.6% in April from 7.5% in March. On a monthly basis, prices rose 0.6% in April, higher than the 0.4% increase seen in March. The rise in headline inflation was expected and can be attributed to unfavourable base effects, as energy inflation declined in April 2022 after rising in March due to the outbreak of war in Ukraine. Core inflation, therefore, provides a better picture of the evolution of inflationary pressures in the country. The decline in core inflation shows that price pressures are quietly easing, although they are still very high.
There is a growing divide between the service and manufacturing sectors. While the number of manufacturing companies seeking to raise prices has fallen significantly, Spanish service companies currently have no plans to slow their price increases. This is due to several factors, including stronger nominal wage increases. In addition, many service companies are struggling to meet growing demand, making it easier for them to pass on higher prices. In contrast, in manufacturing, cost pressures have decreased significantly, reducing the need to raise prices further. In fact, producer price inflation was negative at -1% in March. A year ago, it was still more than 40%.