Inflation in Spain has Reached a 29-year High

According to the Spanish National Institute of Statistics (INE), inflation approached a 29-year high in the country. The main reasons for this are the rise in food and fuel prices. In November, prices increased by 5.6 %.

For comparison, prices increased by 5.4 % in October. According to statistics, the inflation rate in September 1992 was 5.8 %. Inflation is rising across the eurozone, but it is highest in Spain. The region’s annual rate was 3.4% in September.

The main reason for the high level of inflation is the sharp rise in food prices. It has been followed by an increase in prices for fuel and oil. Meanwhile, electricity prices have fallen. However, these figures have been growing in the previous months as well.

Core inflation, which does not take into account the prices for food and energy and which is the most important factor for central banks when determining monetary policy, has risen to 1.7%, the highest rate since July 2013.

While the government argues price rises are transitory, economists fear they could trigger second-round effects on wages and erode corporate competitiveness. Falling unemployment, driven by a sharp increase in hospitality hiring over the summer, will more likely increase price pressure. And, potentially compounding the effect, Spain is set to raise pensions in line with inflation and increase the minimum wage and public salaries in 2022.

Despite the effects of the COVID-19 crisis, the Spanish labor market continues to recover: the number of employed workers increased by the end of 2021 by 359,300 people to reach 20,031,000, according to the latest EPA-INE survey published in October.

According to the European Central Bank (ECB), the eurozone inflation peak reached in November and will gradually decline next year. The reason for this will be the end of the existing delays in the supply sector and the cessation of price increases on energy carriers.