skyrocketing inflation and slowing economy

Skyrocketing inflation and a slowing economy are the main consequences for Spain of the war in Ukraine, which six months later continues to create major economic uncertainty across Europe.

Macroeconomic indicators show that GDP is holding up despite the war, although a difficult autumn is in sight, as is the case with job creation, which is developing well but starting to show signs of fatigue.

The inflation, however, it continues to rise and at the fastest rate in nearly forty years.

The CPIA was shot in Spain until the 10.8% in Julysix tenths higher than the previous month and the highest since September 1984, mainly due to an increase in the electricity price of almost 50% compared to July 2021.

This increase is mainly due to the higher cost of energy products (41.4%), but also to other services related to tourism such as hotels and pensions (33.8%), international flights (21.6%) or tourist packages (17.9%) .

Core inflation, which does not take into account fresh food or energy, stands at 6.1%, the highest since January 1993.

GDP and consumer confidence

Among April and June the economy accelerated the growth rate, up 1.1%, nine-tenths more than in the first quarter, and was driven by the pick-up in household consumption, despite high inflation.

Household consumption has recovered by 3.2%, after a decline in the first quarter due to the mistrust caused by the sixth wave of Covid-19 and the outbreak of the war in Ukraine, which suddenly halted GDP growth (0 .2%) that came from registering rates of more than 2% in the two previous quarters.

The to trust of consumers in the Spanish economy sank in July to its lowest level since March, weighed down by the worse assessment of the current situation and in particular the six-month outlook for the economy in general.

The Consumer Confidence Index (ICC) of the Center for Sociological Research (CIS) stood at 55.5 points in July, 10.4 points less than in June and well below the 100 points separating positive perception from negative, a threshold that is not exceeded since June 2019.

Private sector PMI indicator

Spain’s service sector activity picked up for the sixth consecutive month in July, albeit at a slightly slower pace than in June and with expectations for the future deteriorating due to inflationary pressures.

The PMI index from S&P Global, now integrating IHS Markit, which experts consider to be one of the most current indicators of what’s really happening in the private company economy, said 53.8 pointsbelow 54 in June, but above 50 points marking the boundary between growth and contraction.

However, Spain’s manufacturing sector has fallen from those 50 points since falling for the second consecutive month to 48.7 points in July, below the 52.6 recorded in June and the lowest level since May 2020.

This sector entered negative territory for the first time in a year and a half in July in a context of sluggish demand in the face of strong inflationary pressures and economic uncertainty.

Unemployment is falling, and so is membership

the rate of unemployment dropped on 12.48% (8.75% in Hego Euskal Herria) in the second quarter of the year, the lowest figure since late 2008, after 255,300 people left unemployment and 383,300 new jobs were registered, according to the Active Population Survey (EPA).

However, Social Security data for July shows negative behavior as in July 7366 members were lost on average, the first decline for this month of the streak starting in 2001.

With this evolution, the total number of people employed remains at 20.34 million, while 2.88 million people are enrolled in the offices of the Public Employment Service (SEPE), according to the Ministries of Labor and Inclusion and Social Security.

High price of electricity and fuel

The electricity reached the price of 436.25 euros/MWh on Wednesday 24, the maximum since the entry into force after the cap on gas to compensate the installations that use this material.

Despite the increase, it is still below the historic maximum recorded on March 8 (EUR 544.98/MWh), almost two weeks after the start of the Russian invasion of Ukraine.

The petrol and the diesel oil, For their part, they have registered a downward trend for the past two months, and together with the bonus of 20 cents per liter of fuel approved by the government, they have enabled consumers to small “breath” during the most expensive August bridge in history.

According to data released by the European Union (EU) Oil Bulletin late last week, in Spain petrol sold for an average of 1,597 euros per liter, while diesel was sold for 1,606 euros.

These prices, despite being the highest in the historical record for a long weekend in August, are respectively 18% and 15% lower than the records of petrol and diesel at the beginning of the summer, heavy for the Russian invasion of Ukraine.