In recent times, various indicators have shed light on the prevailing perception of a decline in purchasing power, emerging as a paramount social concern, even surpassing unemployment. This sentiment, starkly contrasting with positive economic growth figures, underscores the meager increase in household incomes compared to the pre-pandemic era. Despite a notable 6% surge in real terms in household disposable income over the past year—an unprecedented pace since the inception of historical records in the 90s—the improvement scarcely seems to offset the blows of the health crisis and the inflationary surge.
The public perception, corroborated by macroeconomic figures, epitomizes the “extensive” nature of our country’s production model. Essentially, our growth hinges predominantly on expanding the labor force or extending working hours, rather than qualitative improvements or productivity enhancements necessitating investment, organizational shifts, and overall heightened productivity.
Hence, the recent surge in household disposable income can be attributed solely and exclusively to an upsurge in workforce participation. Full-time equivalent employment, as measured in national accounting terms, witnessed a 3.2% increase in 2023 and a substantial 7.3% uptick since 2019. However, the average income per employed person barely saw a 2% increment last year, still lingering 4.2% below pre-pandemic levels (when adjusted for inflation). This, given its implications for diminished purchasing power, undeniably influences societal perceptions.
Spain’s growth trajectory is beginning to diverge from that of other European nations. Expansion predominantly hinges on the incorporation of both domestic and foreign labor, with Spain accounting for one in every three jobs created for foreigners within the Eurozone last year. In contrast, countries like Germany are witnessing labor market tightening due to nearing full employment, necessitating a productivity-driven economic advancement coupled with enhanced remuneration offerings.
While acknowledging the existence of more challenging times in the past, it’s imperative to note that household incomes endured a far harsher blow during the financial crisis, stemming from job losses and, post-2010, remuneration contractions. The significant surge in household purchasing power preceding that crisis was fueled by credit and accompanied by a colossal external deficit, rendering it unsustainable. Presently, however, households are deleveraging, and external accounts portray a solid surplus. In this regard, the current production model appears healthier than its predecessor.
In the short term, no discernible shifts are observed in the “extensive” growth pattern characterizing the Spanish economy, which should ideally translate into additional employment contributions to household income and private consumption. Whether investment emerges from its dormancy remains to be seen. Nevertheless, with the latest statistics from the National Statistics Institute (INE), and barring any new shocks, forecasts indicate a favorable GDP trajectory over the next two years, both in absolute terms and concerning the rest of Europe.
However, over time, the model encounters evident constraints, as its functioning offers scant prospects for enhancing purchasing power, especially for demographics disproportionately affected by inequalities. There’s a looming risk of eroding the social pact underpinning the model, tacitly manifesting a preference for job creation over purchasing power improvements. Overcoming this dilemma while preserving resilience factors necessitates a reversal of the relative decline in productivity.
INDUSTRY: Manufacturing output recorded a marginal uptick of 0.1% in 2023, in stark contrast to the Eurozone’s 2.3% decline (based on data up to November). Notable sectors experiencing growth include pharmaceuticals, automotive, and capital goods industries. Conversely, energy-intensive sectors witnessed negative performance, extending declines from the previous year, exemplified by the paper industry, graphic arts, chemicals, non-metallic minerals, metallurgy, iron, and steel. Finally, consumer goods-oriented branches like textiles demonstrated intermediate performance levels.