Spain is currently experiencing a significant decrease in real income, resulting in a decline in consumption across various sectors, including cars, trips abroad, and food products. Recent figures from the Adecco Salary Monitor on Wages report have shed light on the country’s economic challenges.
According to the report, while the average wage in Spain has increased by 4% in 2022, reaching €1,822 ($2,029), the impact of soaring inflation has significantly reduced purchasing power. In fact, the current purchasing power is 7% lower than it was in 2008 during the global financial crisis. Despite a decrease in headline inflation to 1.9% last month from a peak of 10.8% in June 2022, Spanish households continue to be burdened by rising food costs, which have been consistently increasing by more than 10% annually.
Manuel Hidalgo, an economist and senior fellow at the Esade Center for Economic Policy, commented on the situation, stating, “The economy is doing well, but when you look at it in detail, the picture is not that rosy. You may be growing more than the rest of the continent and creating more jobs with the lowest inflation, but if families can’t make ends meet, they will blame you.”
The combination of record inflation rates and sluggish economic growth has resulted in disposable household income being 2.4% lower than pre-pandemic levels. Families in Spain have been adjusting their consumption habits accordingly, with significant reductions in the consumption of meat and fish by 7% and 12% respectively in April compared to the previous year, as reported by the country’s Agriculture Ministry.
An analysis of household consumption in Spain reveals a staggering 6% decline between September and March, emphasizing the challenges faced by the euro area’s fourth-largest economy.
This decline in consumption poses serious consequences for the Spanish economy as it hinders overall economic growth and job creation. A prosperous economy can only be sustained if families can afford their basic needs and have the means to meet their daily expenses. The current situation prompts concerns about the country’s future economic stability and the potential social and political consequences if these challenges persist.
It is imperative for policymakers and government officials to address the declining real income and dwindling purchasing power. Measures should be implemented to mitigate the rising inflation rates, stabilize food prices, and promote wage growth that exceeds the rate of inflation.
Failure to adequately tackle these economic challenges may further erode public trust and dissent among the population, leading to political and social unrest. Therefore, it is crucial for the Spanish government to adopt effective strategies to address these issues promptly and ensure the well-being of its citizens.