Spain | Imported inflation and incomes pact

Summary

Inflation has returned and has done so at rates not seen for decades in most developed economies. Spain has not remained unaffected by this episode of global inflation.

Key points

• Key points:
• If we focus on the quarterly averages of the monthly CPI, we need to go back to 1985 to observe a year-on-year growth rate similar to that of the second quarter of 2022 (9.1%).
• In contrast to consumer price inflation, the GDP deflator stood at 3,6% in the second quarter, one-third of that observed for the CPI.
• For the time being, the second-round effects in Spain are contained and domestic price and wage margins are not behind the rise in inflation. The nominal year-on-year growth rate in wages per full-time equivalent job was 1.8% in the second quarter of this year. In view of the fact that productivity growth was 1.5%, the inflationary pressure on wages was 0.3%.
• It is necessary to maintain the dynamics we have observed so far in the GDP deflator, to prevent inflation from becoming entrenched and to avoid future losses in competitiveness and declines in activity. A multi-year incomes pact would help to maintain the moderation of wages and business margins over domestically produced inflation, reduce uncertainties about the trend in costs and prices, and serve as a reference for both the private and public sectors.

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