Spain's inflation hits 3.6% in July as diesel surge triggers automatic tax safeguard

Inflation reaches two-year high

Spain's National Statistics Institute (INE) confirmed on Thursday that the consumer price index (CPI) rose to 3.6% year-over-year in July, four tenths above June's 3.2% and one tenth above the preliminary 3.5% estimate published on 30 July. The figure marks the highest inflation rate since May 2024 and extends five consecutive months with the annual rate above 3%. Monthly inflation rose 0.3% from June to July, one tenth more than expected, extending six consecutive months of monthly increases. Before the July data, inflation had held at 3.2% from April through June.

The acceleration was driven primarily by fuel and electricity costs. Transport recorded the largest annual increase of all groups, rising more than one point to 6.2%, and led the monthly index with a 2.3% gain. Housing climbed to 5.7% annually, one point more than in June, pulled by electricity, which registered an annual rate of 8.4%. The Ministry of Economy linked the energy pressure to the Strait of Hormuz crisis caused by the conflict between the United States and Iran, which has disrupted maritime routes critical to global energy trade.

Diesel safeguard activated

The July CPI detail confirmed that diesel recorded an annual variation of 15.7%, exceeding the 15% threshold set in Royal Decree-law 18/2026, the government's package of measures to contain the impact of the Iran war. This automatically triggered the safeguard clause of the response plan, raising the hydrocarbon tax discount on diesel to 20 cents per liter in September, up from the 5 cents initially planned and above the current 10 cents. Gasoline, with an annual rate of 7.3%, remained below the threshold and keeps its gradual withdrawal schedule, with a 5 cents per liter reduction in September.

The Ministry of Economy emphasized the proportional design of the mechanism.

The mechanism thus acts proportionately, reinforcing protection only where price pressure justifies it.

Food prices ease

Food prices offered some relief. The annual rate for food reached 1.6%, three tenths below June and the lowest since 2021. The Ministry of Economy stated that inflationary pressure has not transferred to food. Clothing and footwear fell 10.2% monthly due to summer sales, and food and non-alcoholic beverages declined 0.7% monthly on lower prices for fruits and vegetables. Core inflation, which excludes fresh food and energy, stood at 3.0%, one tenth above June. Both the headline and core rates remain above the 2% target set by the European Central Bank.

Government response and regional breakdown

The first response plan was launched on 20 March, with a second package approved by the Council of Ministers at the end of June and backed by Congress on 23 July. Vice President and Economy Minister Carlos Cuerpo's ministry stated that the measures have reduced inflation by an average of one point in recent months.

The response plan has cushioned more than 60% of the price increase from the external shock that the Iran war represents.

By region, all autonomous communities recorded positive annual rates in July. Cantabria posted the highest at 4.3%, while Extremadura had the lowest at 3.0%.