Spain's August Inflation Hits 4.3% as Unprocessed Food Prices Double Their Annual Rate

Spanish consumer prices rose 4.3% year on year in August, 0.7 points more than in July and the fastest pace since February 2023, when the rate reached 6.1%. The final reading from the National Statistics Institute (INE) was reported by Libertad Digital, which noted that transport and food and non-alcoholic beverages were the groups with the greatest influence on the annual rate.

Unprocessed food doubles its annual rate

Among the special aggregates published by INE, energy rose 16.9% in August, 6.8 points more than the previous month. Unprocessed food doubled its July annual rate to 4.5%. The shift is already producing a considerable effect on the household shopping basket, according to Libertad Digital.

Fresh produce, meat and fish sit in the unprocessed category, where prices move with harvests, fuel costs and logistics rather than with contracted processing margins. A doubling of the annual rate within a single month points to cost pass-through moving quickly along the chain.

Funcas and BBVA Research see rates above 4%

Funcas expects inflation of 4.9% next month and says the rate will remain above 4% in the following months, more than double the European Central Bank's 2% price stability target. The think tank projects an average annual CPI of 3.6% for this year and 2.9% for 2027, three tenths of a point above its previous forecast in both cases.

BBVA Research's real-time estimates point in the same direction, with headline inflation accelerating next month into a range of 4.7% to 4.9% year on year. The bank's research unit attributes the upward pressure mainly to the energy component and adds that the rebound in unprocessed food prices could intensify because of higher transport costs and more expensive inputs.

Oil assumptions decide the path

Funcas built its numbers on three scenarios. Oil and gas prices have surged in recent weeks as the conflict worsened, with crude above $100 a barrel and Mibgas around €85.

• Central scenario: war tensions do not escalate further, crude returns to $80 a barrel by the end of this year and to $70 by the end of next year, and the government reintroduces a €0.2 cut in the hydrocarbon tax on both petrol and diesel until January. Average annual CPI: 3.6% in 2026 and 2.9% in 2027.
• Adverse scenario: crude stays around $107 until the end of this year and close to $100 throughout 2027. Average annual CPI: 3.8% in 2026 and 3.6% in 2027.

The €0.2 fuel duty cut assumed in the central scenario runs only until January, which means transport costs for food distribution would face a step change at the start of next year if the measure is not extended. Mibgas at around €85 also weighs on gas-intensive food processing.

Cumulative erosion and fiscal side effects

Official data cited by Libertad Digital show that the erosion of purchasing power since August 2021, when the inflationary episode began, exceeds 24%. Beyond the immediate hit at the checkout and the fuel pump, inflation feeds into pension indexation and into budget items updated in line with prices, such as civil servants' pay and the minimum living income (IMV).

The publication also notes the fiscal side: the decision not to deflate personal income tax (IRPF) brackets amounts to a tax increase through the back door, while the Treasury's receipts also rise with prices through VAT.