Many Spanish families finish the year worn out after a period marked by one of the sharpest price rises in recent memory. As December and Christmas food costs traditionally surge, this year’s energy crisis has helped drive inflation higher. Payrolls rose only 2.1 percent through October, according to Caixabank Research based on anonymized payroll data, while the peak rate reached 10.8 percent in July.
According to the International Labour Organization, wages in Spain have about 5 percent less purchasing power than before the pandemic. The OECD likewise notes that Spain stands near the top of the league for lost purchasing power within its member countries, second only to Greece. From a macro view, Funcas estimates real household income could fall by around 4.3 percent over a year due to the combined drag of inflation and wages.
The decline in purchasing power is most visible at lower income levels, where inflation hits the budget hardest. For the bottom 20 percent of earners, food and energy account for roughly 70 percent of monthly spending, according to the Household Budget Survey. For the top 20 percent, the same categories cover about 57 percent of expenditures.
What worries economists most is how broad inflation has become. At present, around 52 percent of goods and services have risen by more than 6 percent, contributing to the consumer price index. The share of the consumption basket with inflation at 10 percent or higher stood at about 33 percent.
Christmas fuels inflation fever
After a July peak, inflation appears to be moving on a gradual downward path. November data from the National Institute of Statistics show a rate of 6.8 percent, four points lower than the summer peak of 10.8 percent. Analysts suggest the dip reflects both a global economic slowdown and easing energy prices due to policy measures.
Yet food inflation remains stubborn. With an annualized rate around 15.4 percent in October, food prices continue to climb, and the euro area as a whole recorded a 13.6 percent rise in November. The higher costs of energy, transport, fertilizer, and feed—factors not yet reversed by production and processing sectors—mean it will take time for inflation to ease in these goods. Demand rises during the Christmas period add another layer of pressure.
Consumer groups warn that more than a third of items in the Christmas basket hit all-time highs, signaling that Christmas dinners may be the most expensive in years. A first wave of price checks from late November supports this view.
Analysts from Funcas caution that even if energy and fertilizer costs normalize, meat, dairy, and other essentials may take longer to stabilize. They suggest improvements in food affordability could lag behind energy relief, possibly arriving early next year.
Effects on consumption
Looking ahead to the start of next year, many Spanish households may face a long stretch of belt-tightening. The sense of accumulated savings fading away during the crisis remains a core concern for policy watchers.
Data on the savings rate show that, by mid-year, the share of families with disposable income at around 25 percent or more had fallen toward historical averages. Bank deposits remained volatile, with a sizable decline in overall holdings since July. The pattern illustrates how the pandemic-era cushion has diminished more quickly for some families than for others.
Waiting for ECB decisions
Inflation appears to be at a turning point for now. The eurozone rate eased in November after 17 consecutive months of increases, though it remained high at around 10 percent, with Spain posting the highest rate. Central bankers and analysts note that Spain can act as a bellwether for broader euro-area inflation.
The Spanish electricity market continues to reflect global energy moves, with price shifts and policy-driven discounts influencing household bills. Recent November data showed a softer trajectory for overall inflation but a stubborn core inflation component, which excludes energy and unprocessed food costs, nudging higher in Spain. Core inflation tracked at roughly 6.3 percent in November, a figure that could rise above the overall rate in the near term.
This backdrop informs expectations for the European Central Bank’s December decision on interest rates. Market bets are divided between a 50- or 75-basis-point rise, which would lift the policy rate to around 2.5–2.75 percent. The higher borrowing costs compound the pressure on housing loans and consumer budgets alike, tightening the squeeze on family finances.
In sum, the inflation narrative continues to test households as rates rise in the short run while broader indicators suggest a potential easing path later. The balance between energy relief, food affordability, and credit costs will shape the trajectory of family budgets through the coming months. Citations: Caixabank Research, International Labour Organization, OECD, Funcas, National Institute of Statistics, consumer groups, European Central Bank.