Housing and electricity inflation in Spain is running at 23%, transport at 16.3% and food at 13.5%
When does Average Spaniard realise that his wages just don't stretch to all of these price increases any more?
We have to go all the way back to September, 1984 to find an inflation rate higher than the one just confirmed by Spain's National Stastistics Institute (INE) for July. Then it was 11.4%, now it is 10.8%. The Spanish trendline shows no signs of rolling down when looked at with that perspective. Overall, if an Average Spaniard was spending €1,000 on goods last year, those same goods now cost him €1,108. The underlying inflation rate is also up to 6.1%, "that is the highest rate since 1993", says the INE. So if Average Spaniard did not buy any food, petrol, electricity or gas with his €1,000, he would still be paying €1061 for his stuff this year compared to last.
But what are the three main components of the general inflation increase, according to the INE? You guessed it, the ones that are left out of the underlying calculation: food, housing and energy, and transport. That's this graph:
Housing, water, elecricity and gas is running at 23% inflation in Spain, so to get what €1,000 spent on rent and fuel last year got him, Average Spaniard needs to spend €1,230. Transport costs are up 16.2%, so €1,000 spent on buses and trains last year is now €1,162. And food and non-alcholic drinks are up 13.5%, so food bought for €1,000 last year now costs him €1,135. If we imagine that Average Spaniard spent €3,000 last year on those three basic living and moving about components—a flat, public transport or a car and eating and drinking every day—those same items now cost him in total €3,527.
And then there are all of the regional differences. While housing inflation in the capital, Madrid, is only lolloping along at a slovenly 17.9%, in the northern region of Navarra it has already raced up to 30.3%. While clothing and shoes in Madrid have only risen 2.1% (sombody tell Lagarde, that's on target..!), for some reason in the southern region of Murcia, people are already paying 11.0% more.
The question I have about all of this is how long prices can keep going up before socially something breaks? When does this become an enormous political problem? When does Average Spaniard realise that his wages just don't stretch to all of these price increases any more? When does Average Spaniard stop paying his bills or his mortgage or his car loan because he has to pay 23% more to eat or 30% more to not live on the street? Are there going to be strikes? Demands for much higher wages? What will the government do with public wages and pensions? How many businesses that depend on discretionary spending collapse?
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