Inflation does not let up and the persistent pressures derived from the energy markets are unflattering, but behind the great figures there is also positive and relevant news for economic policy.
For now, the CPI seems to have taken a turn, after confirming its jump to 4.9% in the last month. It is surprising that the resources allocated to mitigating the effects of the crisis in the Middle East, distributed more generously than in the other large European countries, have had such a modest effect: so far this year, the energy CPI has grown exactly the same as the eurozone average. The measures would have served to calm the rise in fuel prices, but they do not seem to have brought down the price of electricity: the electricity bill has followed an upward path, with increases below the 15% threshold that would have motivated the application of tax discounts. Perhaps the return of the Iberian exception would be justified, with a cap on the price of gas that enters the electricity supply.
The overall balance would motivate a change in strategy towards targeted aid in the sectors and social groups most affected by the increase in energy costs. For example, transfers channeled toward transportation—a backbone sector of the economy—serve to contain the indirect effects of rising fuel prices, while discounts applied across the board are diluted, resembling an implicit transfer of income from all taxpayers to those who travel by car, including tourists. In the same way, a social benefit focused on vulnerable households is more effective (both from a distribution point of view and for public coffers) than a universal reduction of VAT on fuel.
The positive part is that no significant second-round effects of the energy disturbance have been detected, at least for now. The salaries agreed during the current year stand at 3.6%, a little below the anticipated inflation for the year as a whole. Nor is there a very significant contagion from fuel to the rest of the prices: the food chain has reacted with moderation, and the rebound that has occurred in the last month is concentrated in a few products that make up the shopping basket. Nothing to do with what happened in the previous inflationary cycle —between 2021 and 2025, the CPI for food rose at an annual rate of 7%, more than double that of this year.
As for industrial goods, either companies are absorbing the extra production costs by compressing their margins, or they are being displaced by the import of Chinese products. And, although services are rising at a rate close to 4%, the trend precedes the geopolitical conflict, reflecting underlying factors such as the rise of tourism. Hotel and restaurant prices have skyrocketed, and the sector's margin-on-sales ratio is around 12%, three points above the economy as a whole. Finally, the surpluses are even higher.
In short, the economy has shown a certain capacity to adapt to the energy shock, so that the real inflation problem that Spain is experiencing comes from the expansionary cycle itself and lack of competition, independently of the conflict in the Middle East.
Despite this, the loss of purchasing power of citizens that the inflationary outbreak entails, together with the rise in interest rates, point to a slowdown in consumption, the purchase and sale of homes and investment, due to their sensitivity to the price of money. The difficulty lies in how the State can help face this new phase of the cycle, taking into account the narrowing of its room for maneuver.
Margins
Industrial companies could be narrowing their margins due to rising energy costs. The PMI indicator of costs, or prices paid by the industry, has increased significantly since last year, reaching a maximum of 71 in September. By comparison, the prices received by the industry have risen at a lower rate, up to level 57, evidencing the partial transfer of production costs to sales rates. The ratio of surpluses over sales of manufacturing is also lower than the average for the economy as a whole, according to the Margins Observatory.
