Spain's inflation has registered a continued decline in May, now standing at 1.9% year-on-year, marking a decrease of three-tenths from the previous month and the lowest level in seven months, according to preliminary data from the Instituto Nacional de Estadística.

This figure aligns with analysts' forecasts and emerges amidst specific energy tensions due to a blackout on April 28, which led to a rise in electricity prices shortly thereafter.

However, the overall impact on the general inflation index has been contained, benefiting from an overarching trend of decreasing energy costs established over recent months.

Core inflation, which excludes volatile food and energy prices, also showed a minor moderation, dropping to 2.1%, three-tenths lower than April's figure.

Government sources attributed this reduction to the favorable performance of tourism-related services and stable electricity prices.

The blackout incident necessitated intensive activation of adjustment services in the wholesale market and increased use of more expensive fossil fuels to ensure supply.

Consequently, the bill for electricity in the regulated market saw an average rise of approximately four euros monthly, as estimated by the Comisión Nacional de los Mercados y la Competencia.

Nonetheless, this temporary spike has not been sufficient to reverse the downward trend in electricity bills since late 2023, partly driven by a more favorable international context, including declining oil prices and a normalization of natural gas prices following prior tensions caused by Russia's invasion of Ukraine.

Despite the recent increase in electricity costs, energy as a whole has continued to exert downward pressure on inflation.

Analysts at BBVA Research noted that this dynamic explains the reduction in the overall inflation index.

Raymond Torres, director of economic forecasts at Funcas, remarked that energy prices have moderated even more than anticipated, citing potential monthly decreases exceeding 1%.

He emphasized that the effects of the blackout have been mitigated by favorable developments in other areas of the energy sector and have had a limited overall impact.

The Ministry of Economy has expressed confidence in the figure, stating that "the Spanish economy continues to demonstrate a significant capacity to combine sustained inflation reduction with one of the highest growth rates among developed countries, particularly relevant in the context of elevated international uncertainty."

Although underlying inflation has moderated from the previous month, it remains higher than the overall index, a phenomenon attributed to persistent upward pressure from service prices.

This component, closely tied to labor costs, reflects delayed effects from wage increases solidified in recent collective agreements.

Torres noted that prices for services continue to rise well above 3%, driven in part by strong tourism demand and the impact of newly negotiated wages.

This inertia within the more rigid pricing segment impedes a faster moderation of underlying inflation, which traditionally indicates long-term price trends and the effectiveness of monetary policy.

The May figure represents the third consecutive month of declines.

Following a start to 2025 with inflation rates close to 3%, the rate began to diminish in March, now reaching 1.9%, even below the symbolic target set by the European Central Bank.

In contrast, during the same period last year, May saw a spike in inflation to 3.6%, driven by an unexpected rise in food prices and persistent fuel pressure.

The current context is different: the energy component no longer acts as an inflationary catalyst, and while services continue to pose pressure, their impact is mitigated by stability in other goods.

After peaks in food prices during 2022 and 2023, the food inflation rate fell by four-tenths last month, settling at 2%.

Analysts see potential for inflation to remain within the target set by the ECB.

The ongoing challenge lies within core inflation, particularly in services, which shapes a scenario where "contradictory trends coexist," according to Torres.

As the final data await release, the Organización de Consumidores y Usuarios (OCU) has also reported a decrease in the shopping basket for May. The drop was quantified at 0.56%, reflecting an analysis of over 100 staple products across eight supermarket chains.

In the fifth month of the year, categories showing the most significant price reductions included fish, beverages, household goods, and pantry items.