Good news for Alicante workers at last—the price pressures seen in recent months eased in June, the first time since February 2021. The salary increases agreed at the state level are set to outpace inflation data, allowing wages to regain some purchasing power after a long stretch of losses driven by higher material costs and supply bottlenecks that followed the pandemic and the Ukrainian conflict.
Of course, the improvement remains modest and does not fully compensate for the ground lost. According to calculations released this Wednesday by the INE, inflation in the province fell to 2.1% in June on an annual basis, down from 3.3% in May. While this is slightly above the national rate of 1.9%, it marks a significant improvement from the 10.4% price rise seen in June of the previous year.
More importantly, the data stays below the expected level for wage growth in the province. A new agreement between unions and employers sets a 2.95% average increase for this year in the province, according to the Ministry of Labor and Social Economy. That means a 0.85 point rise above some earlier expectations. The key question now is whether this trend will continue through the rest of the year.
Alicante workers have accumulated a loss of purchasing power of about 1,300 euros in two years
In terms of salaries, the outlook should improve as the national agreement between the major unions and employers unfolds. The plan calls for a 4% increase in 2023, followed by 3% in 2024 and 2025, with an additional 1% if inflation exceeds those levels. The challenge is that this is not mandatory, and given falling inflation, many companies and sectoral employers may be reluctant to commit further. Nevertheless, the ground already gained is substantial; when looking at 2021 and 2022, wages rose by an average of 4.7% while inflation climbed by 12%, underscoring the recent erosion in purchasing power for many households.
Time will also reveal whether prices stay moderated, helped in part by a drop in fuel costs in the United States relative to a year ago, which also pulled down electricity prices. In Alicante, this component became cheaper by as much as 32% versus June 2022.
most expensive food
On the other hand, food prices remain a persistent issue, continuing to rise at a double-digit pace, though somewhat slower than in previous months. In June, the consumer basket in Alicante was about 10.4% higher than a year earlier, slightly above the national average. Sugar remains the most inflationary item with roughly a 41% year-over-year increase, while milk costs rose about 19%, potatoes about 18.6%, pork around 15.8%, and mineral water up roughly 10.6%. Fresh fruit, however, fell by about 5.1%.
Food consumption drops by almost 5%, while family spending rises to 11.4%
This divergence has challenged policymakers as they consider extending value-added tax relief on basic goods. While consumer groups pressed for more support for household essentials, that broader relief was not extended. Yet the relief was broadened to cover a larger set of items, acknowledging the strain on family budgets. Beyond food, other areas also felt price pressures: tourism packages rose about 24%, hotels were 10.6% more expensive, and cars cost about 7.6% more. Entertainment and cultural activities also saw price increases around 6% since mid-2022.
Industry agreements show some divergence in gains
In Alicante, the wage increases negotiated at the sector level tend to be higher than those in individual company accords. Through June, 48 company contracts in the province averaged a 2.79% rise, compared with 2.96% across 26 sectoral agreements. The overall average of 2.95% falls short of the national average of 3.26%.