Spain inflation rate rise to 5.6%

Ongoing supply problems brought about by the pandemic and the rise in fuel prices has seen Spain inflation rate rise to 5.6% in November. The rate, which is now at its highest since September 1992, rose 0.2% above that registered in October.

Inflation in Spain has risen much like it has elsewhere in the world. Supply chain issues, increases in food prices and most of all energy prices, have pushed the rate steadily upwards.

The increase has caused concern that spending power is declining with a greater percentage of wages being spent on household necessities, fuel, gas and electricity. The good news is that the price of electricity is starting to come down and it is expected fuel will do likewise with the announcement of the new Covid-19 variant Omicron and following an agreement between China and the USA to take pressure off demand by releasing reserves.

Spain’s central bank, Banco de España, like most central Banks believes the upward trend in Spain inflation to be temporary and expect the rate to begin falling in the new year. The likelihood is however, that wage demands will increase give the high inflation rates and that could stem any short term decrease.

Perhaps most disconcerting is the recent round of restrictions that have been introduced following the discovery of Omicron variant and the steady rise in infections across northern Europe. Such lockdowns will invariably hamper any economic recovery and will be of concern to highly indebted countries, like Spain, and those with high unemployment levels. Any long term lockdown will inevitably affect consumption and that is likely to result in energy prices falling once again.

The Spain inflation rate rise to 5.6% will be cause for concern in government circles and business with prolonged lockdowns likely to affect the manufacturing sector badly. The motor industry who are already struggling with supply chain issues would be particularly hard hit as would tourism. Spain desperately needing a return to the number of visitors welcomed in 2019.

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