Spanish inflation in October remained at 4.9 percent, its highest level since February 2023, official data showed Friday, one month before an election in which the cost of living will be a major issue.
But Spain’s dynamic economic growth — which Socialist Prime Minister Pedro Sánchez’s government has regularly used to defend its record — maintained its rhythm at 0.6 percent in the third quarter.
The provisional October inflation of 4.9 percent released by the National Statistics Institute (INE) is equal to September’s figure for the European Union’s fourth-largest economy.
The soaring costs of gas and other fuels kept inflation high despite a year-on-year drop in the price of items including food, non-alcoholic drinks and clothing, the INE said.
The Middle East war, sparked in February by US-Israeli strikes on Iran, has roiled global energy markets as the conflict disrupts key supply chains for oil and gas, notably due to the effective closure of the Strait of Hormuz.
Although Spain is less dependent on fossil fuel imports than other major economies, thanks to its use of nuclear and renewable energy, the volatility in oil and gas costs has caused inflation to spike.
The left-wing government introduced a cap of 15 percent on the increase of natural gas prices as well as fuel discounts through to December in a bid to shield consumers.
The INE also announced that GDP growth between July and September reached 0.6 percent, mostly thanks to internal demand, after a 0.7 percent increase in the second quarter.
Earlier this month, the Bank of Spain predicted that GDP growth would hit 2.6 percent this year, citing resilient household spending in one of the world’s most dynamic developed economies.
But the cost of living is a key issue for voters, especially Spain’s long-running housing crisis, with protests over the issue culminating in Sanchez’s calling of a snap general election on November 29.
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Although Spain continues to outperform larger EU peers such as France and Germany, “the clearest threat to growth comes from rising prices”, said Pedro Aznar, a professor at the Esade business school.
“For now, the growth of employment and wages are compensating for the negative impact of the rise in the cost of living,” Aznar told AFP.
But with inflation and housing costs weighing on purchasing power, “the government is receiving relatively little electoral benefit from the country’s macroeconomic outperformance”, according to ING analyst Pablo Muylle.
