Research Briefing | Nov 8, 2021

Spain | Strong wage gains but limited risk of inflationary cycle

Strong wage gains but limited risk of inflationary cycle

With inflation in Spain hitting a 30-year high, fears of an inflationary cycle are rising. However, the transition from the present energy-driven inflation push to a broad rise in consumer prices will likely require a sustained increase in wages. And while we expect wages in 2022 will grow at their fastest pace in a decade, the projected 2.5% advance remains well below the rises seen in the 2000s, the last time Spain experienced sustained above-target inflation, thus limiting the chances of another sustained inflationary cycle.

What you will learn:

  • The strong historical correlation between wages and past inflation in Spain means we expect to see salaries rise strongly in 2022.
  • Stronger wages, though, will feed into higher core inflation as companies pass along some of their costs, a knock-on effect already incorporated into our forecast.
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