Spain's Inflation Divide: A Golden Opportunity in Energy and Tourism Sectors

The divergent inflation trends in Spain—falling energy prices and rising core inflation—are creating a unique investment landscape. While headline inflation eases to 2.2% (forecasted for May 2025), sector-specific dynamics are unlocking value in utilities and tourism-driven industries. This article explores how investors can capitalize on this dichotomy.

Energy Prices Plunge: Utilities and Industries Reap Benefits

Spain’s energy sector is experiencing a historic correction. In March 2025, electricity prices plummeted by 53.7% month-over-month to €51.1/MWh, driven by surging renewable generation from storms and a temporary VAT hike reversal. This decline has reduced input costs for utilities like Iberdrola (IBE.MC) and industrial firms reliant on energy-intensive operations.

The downward pressure on energy inflation (now -15% YoY in utilities) is structural, as renewables account for 85% of new power capacity added in 2024. Meanwhile, the EU’s push to decarbonize and Spain’s strategic solar/wind investments will lock in cost stability for energy-sensitive sectors.

Core Inflation Rises: Tourism and Services Signal Strength

While energy prices retreat, core inflation (excluding food/energy) remains resilient at 2.4% (April 2025), driven by robust demand in leisure and hospitality. Spain’s tourism sector—a cornerstone of its economy—has rebounded post-pandemic, welcoming 42.5 million visitors in H1 2024, a record high.

Hotels like Meliá Hotels International (MHY.MC) and travel platforms such as IAG (IAG.L) are benefiting from rising leisure spending, with Easter 2025 bookings up 18% YoY. Even as global economic uncertainty lingers, Spain’s cultural appeal and infrastructure (e.g., high-speed rail) ensure its tourism dominance.

Why Investors Should Act Now

1. Utilities: Buy the dip.
2. Iberdrola (IBE.MC) and Red Eléctrica (REE.MC) are well-positioned to capitalize on energy price stability and green infrastructure spending.

4. Hospitality: Play the rebound.

5. Meliá (MHY.MC) and NH Hotel Group (NHH.MC) offer exposure to Spain’s tourism boom, with occupancy rates near 80% in peak months.

6. Consumer Discretionary: Tap into leisure demand.

7. Inditex (ITX.MC) (Zara’s parent) and Amadeus IT Group (AMS.MC) benefit from higher consumer confidence and travel spending.

Risks to Monitor

• Oil price spikes: A rebound in oil to $85+/barrel (from $75 today) could reverse energy deflation.
• Labor shortages: Striking in hospitality (e.g., hotels) could disrupt capacity.

Conclusion: A Strategic Allocation for 2025

Spain’s inflation split is no accident—it’s a reflection of its economic retooling toward renewables and tourism. With core services inflation signaling strong demand and energy costs stabilizing, now is the time to overweight utilities and tourism stocks. The EU’s harmonized data (HICP) confirms Spain’s inflation trajectory aligns with broader European trends, offering investors a macro-backed entry point.

Act now: Utilities for stability, tourism for growth. The Spanish sun is shining—don’t miss the rays.