The Bank of Spain warns of the impact of leisure and housing on inflation

The agency warns of the rise in the underlying CPI and believes that the “notable loss of purchasing power” will help moderate the rise in prices

AC Madrid

The unstoppable rise in prices is not something exclusive to 2022, nor is it the effect of the energy crisis. Core inflation -the most persistent, when excluding the prices of fresh food and energy- increased by 5.3% in Spain between July 2019 and July 2022.

This was stated yesterday by the Bank of Spain in a report in which it analyses, through different sub-indices, the culprits of the rise in prices in this period that encompasses the pandemic. The conclusion is clear: housing and tourism are the components that have weighed most in this trend that is already being transferred to the general trend.

The agency is especially concerned about the contribution of the ‘leisure, restaurant and tourism’ sub-index, indicating that it explains 1.6 percentage points of July’s inflation, compared to just one point in the euro zone average.

It is not just that this sector weighs more in the Spanish basket. The supervisor makes it clear that the country has also suffered “a greater increase in prices in the last year.”

The problem is that this rise in the most stable components of inflation is uncertain. “It will depend on the evolution of the war in Ukraine,” the economists say. Thus, the Bank of Spain once again calls for containment of wages and business margins, anticipating that “the notable loss of purchasing power” will moderate aggregate demand and the dynamism of prices.

In this sense, from the Bank of Spain they anticipate that the high levels of inflation “will persist for longer than expected”. This was also stated yesterday by the Director General of Economy and Statistics of the Bank of Spain, Ángel Gavilán, who took advantage of a presentation at the Madrid Stock Exchange to once again highlight the doubts that persist regarding the economic recovery. In fact, the institution forecasts a slowdown in activity, penalized by the same “headwinds” that weigh on the global and European outlook, such as inflation, uncertainty, the energy crisis or the tightening of financial conditions.

During his speech at the ‘Swiss Bankers Executive Study Tour’, Gavilán explained that despite the strong tourist season, some signs of weakening activity are already being observed, such as employment, as well as confidence and those of consumption and production. Of course, the General Director of Economy highlighted the data for the second quarter, with GDP growth higher than expected, driven by the reopening of the economy. However, he insists on the risk of inflation that continues to surprise on the upside and is already spreading to the entire consumer basket.


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