SPAIN: Accommodation and Package Holidays Helps Services HICP Re-accelerate

Spanish final May HICP confirmed flash estimates at 3.8% Y/Y (vs 3.4% prior). As indicated in the flash release, a sequential increase in electricity prices pushed the headline rate higher (energy HICP was 7.9% Y/Y vs 5.0% prior).

• HICP excluding unprocessed food and energy ticked higher in May after 9-months of deceleration, to 3.2% Y/Y (vs 3.0% prior). 
• This was driven by a reversal in services inflation to 3.9% Y/Y (vs 3.5% in April, 4.1% in March). Core goods also ticked up to 1.0% Y/Y (vs 0.9% prior).
• Several major services categories accelerated in May: (1) Restaurants and hotels to 5.4% Y/Y (vs 4.7% prior), driven by accommodation services at 7.9% Y/Y (vs 2.2% prior). (2) Recreation and culture to 3.7% Y/Y (vs 2.8% prior), with package holidays rising 8.5% Y/Y (vs 4.6% prior).  (3) Transport to 3.8% Y/Y (vs 2.8% prior).
• The May services PMI noted that higher salaries continued to contribute to higher input costs, which are being passed on to consumers.
• Additionally, the prices paid metrics within the EC’s May business services ticked up for services (20.9 vs 18.8 prior) and industry (10.1 vs 5.0 prior).
• Overall, these surveys suggest services HICP will remain stubborn in the months ahead, while core goods inflation will likely tick higher as base effects fade.
• Both processed and unprocessed food metrics decelerated on an annual basis, but remain above 4.0% Y/Y each.