Inflation reduces the income of Spaniards twice as much as that of Germans or French


OECD warns rising prices are ‘undermining’ family savings, and ECB predicts worse outlook ‘for 2022 and beyond’

Edurne Martinez

The high inflation that all countries are experiencing as a result of the war in Ukraine is a matter of great concern for the OECD which, in its latest report on household income, warns that per capita income has fallen by 1.1% in the first quarter of the year the average of the 36 countries that make up the organization, which means a decline in the purchasing power of families and the slowdown of the economy.

According to their data, although household income fell from January to March – coinciding with the start of the conflict – GDP per capita increased by 0.2%. This situation is the opposite of that observed since the outbreak of the pandemic, when family income increased (due to the savings rate), while GDP fell. The gap has widened so much during the year of confinement that real household income is now 2.9% higher than in January 2020 despite the fall it has experienced in recent months, while the GDP is only 1.6% higher at this time.

What is happening now is that the rise in consumer prices is “undermining” household income, details the OECD. Moreover, if we focus only on the countries that make up the G7, the world’s largest economies, per capita income fell by 1.2% from January to March. Among them, the impact of inflation on families was particularly high in France, where resources fell by 1.9%, and in Germany, by 1.7%. But these figures are disproportionate to those of Spain, where high inflation has contributed to a sharp drop in disposable income, precisely 4.1%, four times more than the average of the OECD and the G7. The only European country that overtakes us is Austria, with -5.5%.

This is not surprising, given that Spain’s inflation rate is the highest among its European partners. The latest Eurostat data for July indicates that on average eurozone countries recorded inflation of 8.9%,
against 10.8% in Spain. Also higher than that of Germany (8.5%), Italy (8.4%) or France (6.8%).

Saving, an impossible mission

And the relentless rise in prices affects the economic forecasts of organizations. The European Central Bank (ECB) on Thursday worsened its outlook in its monthly bulletin by acknowledging that “inflation remains undesirably high” and announcing that it will remain very high for longer than expected. “Growth will slow, darkening the outlook for the second half of 2022 and beyond,” the ECB assumes in its report.

Oil prices jump 56% in a year and a half

The problem is that this situation comes at a time when the economy of many families and businesses has not recovered from the pandemic. Indeed, although Spain saw a record rise in the savings rate in 2020 and 2021 due to the restrictions, this was only concentrated in one in five households, or 20%, according to figures from the ECB. These are the few families who are now better placed to deal with high inflation.

The agency specifies that during the pandemic “most households have not been able to increase their savings rate, only 20% have increased it and about 16% have reduced it”. Moreover, these households that have managed to save are generally those with the highest level of income, and therefore the least affected by the rise in prices. Thus, according to the ECB, this could “limit” the positive impact of these savings on the recovery in consumption.

And if saving has been difficult for Spaniards in the last two years of the pandemic, currently with inflation it is an almost impossible mission. The shopping cart exploded, with a big
rising commodity prices como el aceite (56%), el pan (17%), los huevos (16%) o la carne (10%), lo que situa a España con subidas de precios más altas que la media europea, según datos del Banco de Spain.

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