Impact of inflation in Spain in 2021 and 2022: Which households have been the hardest hit?

Impact of inflation in Spain in 2021 and 2022: Which households have been the hardest hit?

Fecha: mayo 2023

Desiderio Romero-Jordán

Inflation impact

SEFO, Spanish and International Economic & Financial Outlook, V. 12 N.º 3 (May 2023)

In the wake of the crisis generated by the pandemic, worry over inflation is once again dominating the economic debate. On the social front, the intensity and persistence of this bout of inflation is causing a raft of undesired collateral effects for households: sharp erosion of real income; higher costs for staple products; higher mortgage servicing costs and difficulties in setting aside savings. All these problems have intensified in the last two years, with the consumer price index (CPI) jumping from 3.1% in 2021 to 8.4% in 2022. However, the headline figures mask far bigger price increases in a broad spectrum of basic goods and services. For example, electricity costs surged 35.6% higher in 2021, while olive oil prices shot up by 26.1% in 2022. Using the micro-level basket of goods and services included in the Spanish Household Budget Survey (SHBS), this paper calculates a price index by household for 2021 and 2022. On average, the results clearly show that the post-pandemic inflationary phenomenon has hurt less well-off households proportionately more, particularly those in the first three income deciles. In other words, the households that spend roughly 14,000 euros per annum (around 1,200 euros per month). The regions most affected have been Castile-La Mancha, Castile-León, Extremadura, Galicia, La Rioja and Aragón, which between them represent the bulk of unpopulated or so-called ‘empty Spain’. The households located in the smallest towns, with fewer than 10,000 inhabitants, have been affected the most, particularly those over 65 living alone.

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