Spain | Inflation: here and now

Summary

As the end of the year approaches, it is a good time to think about things we want to take with us into 2022 and what we want to leave behind. Perhaps what we are most anxious for is an end to the pandemic and to get back to “normal” life. Ideally, the inflation that we have suffer would come to an end right here and now.

Key points

• Key points:
• There is a great desire to see a continuation of the recovery in the economy and employment. In addition, at this point in the year, one of the most important questions in relation to growth expectations is how much of this current inflation can we leave behind in 2021 and how much will remain with us in 2022?
• A big part of the consumer price rises seen have resulted from higher energy costs — which are mainly due to temporary supply side factors that are external to the Spanish economy. However, because of the high degree of energy dependency, such price rises have a direct and major effect on households.
• However, if these higher individual costs are passed on to the rest of society—e.g. from imported energy inflation—it could result in greater and more permanent upward pressure on prices in general and a downward pressure on demand.
• The lowest-income households in society face an inflation rate above 6.0% y/y, while for those with the highest it is under 5% y/y. Similarly, there are also notable differences depending on the age of the main breadwinner. Older households spend more on electricity than younger ones — implying that the cost of their basket of goods and services may also have increased more.

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