Inflation Rebounds Sharply
Preliminary data released by Spain’s National Statistics Institute (INE) on August 28 shows that the annual growth rate of the Consumer Price Index (CPI) reached 4.3% in August 2026. This figure is a significant 0.7 percentage point increase from July’s 3.6% and marks the highest level since February 2023, indicating a resurgence of upward price pressure.
Fuel Prices are the Main Driver
In contrast to the headline inflation, core inflation, which excludes energy and unprocessed food prices, actually decreased by 0.1 percentage points in August to 2.9%. This divergence clearly indicates that the root cause of the current inflation surge lies in the energy sector, particularly the sharp rise in fuel prices, with pressure yet to spread widely to other economic areas.
According to data monitored by Spain’s Ministry for Ecological Transition, the average price of diesel rose by approximately 21% between early July and the end of August, while gasoline prices increased by about 13% during the same period.
Impact on Cost of Living and the Economy
The rise in fuel prices is directly reflected on the price boards at gas stations, with diesel prices in some areas recently surpassing the €2 per liter mark, placing a heavy burden on drivers. More importantly, as a fundamental production input, rising fuel costs will gradually push up the prices of food, goods, and other services through logistics and transport, posing a potential risk of secondary inflation for the wider economy.
Government Adjusts Fuel Subsidy Policy
To mitigate the impact of rising fuel prices on citizens and businesses, the Spanish government has decided to adjust its fuel subsidy policy starting in September. Under the new regulations, the subsidy for diesel will double from the current €0.10 per liter to €0.20 per liter to counteract its more drastic price increase. Meanwhile, due to the relatively moderate rise in gasoline prices, its subsidy will be reduced to €0.05 per liter. This move aims to more precisely offset price volatility, but Spain’s future price trends will remain highly dependent on changes in the international energy market.
