PPI Turns Negative as Energy Prices Fall

Spanish PPI declined -2.2% m/m and dropped 9pp to a contractionary -1.0% y/y in March, recording the first deflationary y/y reading since 2020.

• Falling energy prices accounted for the bulk of downwards pressure, declining -7.4% m/m and -15.9% y/y (the latter over 20pp below Feb).
• March data highlighted a marked divergence between PPI and PPI ex. energy in Spain. PPI ex. energy continued to slow in March, cooling by over two points to +7.3% y/y, despite standing over eight points above that of headline PPI.
• In March, stark base effects have affected goods which experienced substantial price volatility due to supply squeezes at the onset of the Russia-Ukraine war.
• This was evident in intermediate goods inflation, which slowed over three points in March, to +3.5% y/y, as chemical products, nitrogenous compounds, fertilizers fell after having risen in March 2022. Non-durable consumer goods slowed almost two and a half points to +13.2% y/y, largely due to falling fat/oil prices.
• The continuation of easing PPI (albeit slower on core) in the eurozone is positive news for the ECB. Whether sticky services inflation will be also see relief remains a key concern.

PPI Y/Y vs PPI Ex. Energy:

Source: INE