Families have sub-zero purchasing power for Christmas

By international Labor Organization (ILO), wages in Spain are almost 5% lower in purchasing power than before the pandemic. this OECD, For its part, it positions Spain as the second country in the organization, after Greece, where wages have lost more purchasing power. From a macroeconomic point of view, according to Funcas calculations, real household income is estimated to decrease by 4.3% in one year due to the combined effect of inflation and wages.

this loss of purchasing power This is obvious. First of all, it’s at the lowest income levels, where the most inflationary goods and services make up the largest portion of shopping carts. For the lowest income 20% of the population, food and energy represents 70% of your monthly spending basket. Household Budget Survey. For the 20% with the highest income, food and energy cover 57% of their expenditures.

Most worrying is that high inflation is reaching more and more goods. At this time about 52% of goods and services It reported increases of over 6%, which makes up the CPI. The ratio of the consumption basket with an inflation rate of 10% or more was 33%.

Christmas fuels inflation fever

After the peak in July, inflation seems to be on a steady correction path, and data released in November show that National Institute of Statistics (INE) marks a rate of 6.8%, four points below the summer peak of 10.8%. “Inflation may have peaked due to both the global economic slowdown and the slowdown in energy prices as a result of the measures taken,” said President Erdogan. Economic and Social Council (CES), Anton Costas.

However, the correction in inflation does not seem to have yet reached food, whose price increases continue unstoppably at a record 15.4% annualized rate in October (latest data available). The phenomenon is not just Spanish. Food inflation in the euro area rose again in November, reaching 13.6%.

transfer final price of food The fact that the increase in costs (energy, transport, fertilizer, feed…) has not yet come to an end – as explained by different production and processing sectors – predicts that it will still take time for inflation in these goods to stop. To all this we must add the increase in demand during the Christmas period.

“More than a third of the products that make up the Christmas basket are at an all-time high, so Christmas dinners will be the most expensive in years.” consumer organization After OCU collects the first wave of prices for these products at the end of November.

“Food prices will fall as energy and fertilizer costs moderate. But it is still possible to think that it will be a while. It’s hard to imagine that this food restraint will happen during the Christmas campaign, but it will come; maybe early next year”, decides Raymond Torres, Director of International Situation and Economics. Savings Banks Foundationfuncas

Effects on consumption

In any case, by that time, that is, at the beginning of next year, Spanish families had “a long pit slopethree months” predicts Torres. The reason for this pessimism is that until then mattress protector families accumulating during pandemic restrictions. “For the majority of households, the ‘excess savings’ accumulated during the crisis have disappeared,” says the Funcas economist.

The proof of this is Mr. savings rate The proportion of families reaching 25% of disposable income in the second quarter of 2020 is already around 8.5% by the middle of this year and is moving towards the historical average of 6.7% for the Spanish economy. since July bank deposits The proportion of Hispanic families has dropped by almost 10,400 million euros in just three months, but barely 500 million (20 times less) in the same period last year.

waiting for the ECB

For now, inflation seems to have entered a turning point. The eurozone rate fell in November for the first time after 17 months of increases and remained at the still very high 10% (from 10.6% in October), with Spain having the highest rate. “Spain serves as a kind of leading indicator of what will happen with inflation in the euro area,” Bank of Spain Governor Pablo Hernández de Cos told the Senate on Tuesday.

fixing system electricity prices In Spain, both energy increases in international markets (starting to happen at the end of 2021) and discounts (currently) are transferred to the electricity bill faster here.

November inflation data from Spain and the Eurozone surprised the downside as concerns gradually shifted to core inflation (excluding more volatile energy and unprocessed food prices). Core inflation in Spain rose by a tenth to 6.3% in November, and it cannot be excluded that it may soon exceed the overall rate (currently 6.8%). this evolution Core inflation It is an indicator of the extent to which companies reflect the increase in energy and other costs to final consumers.

In any case, the extent of the first inflation cut in the eurozone in 17 months has served to open up the debate over whether it will soften inflation. European Central Bank (ECB) to select the minor rise Interest rates at its next meeting on December 15. Bets are split between an increase of 50 basis points or 75 points, which in any case will increase the official price of the coin to 2.5% or 2.75%.

The increase in interest rates and its effect on the increase in housing loans close the circle of the devastating effects of the inflation spiral on the family economy.