More than half of the inflation in Spain is imported from abroad, as shown by the huge difference between the GDP deflator and the CPI. The GDP deflator is an index that measures the increase in prices of what is produced in the country without taking into account what is imported, such as oil or gas. The deflator is applied to everything produced domestically.
Instead, the CPI takes everything into account: including what is derived from imports. As can be seen in the attached graph, the Eurostat data compiled by Joan Ramon Rovira, director of the studies service of the Barcelona Chamber of Commerce, show that in 2022 the CPI is estimated to be 8.5% and the deflator of GDP of 3.4%. This means –explains Rovira– that more than 5 points of the increase in prices registered in Spain is caused by increases in the cost of imported goods.
"The difference between the CPI and the deflator tells us that most of the inflation reflected in the CPI comes from imported goods, but we cannot determine to what exact extent only by calculating the difference between the CPI and the deflator," he qualifies. “The CPI measures the price level of all final goods and services destined for final consumption, including imported goods or those with an imported component”.
Raymond Torres, director of Coyuntura de Funcas, adds that the significant growth differential between the GDP deflator and consumption (or the CPI) "evidences the imported component of inflation." This indicator shows – Rovira insists – that the salary increase is not being fully transferred to the cost of what is produced in Spain.
If this phenomenon known as second-round inflation were taking place, the GDP deflator when measuring the increases in internal costs would be more similar to the real CPI and for now it is not. “So far we have not observed second-round inflation, because the increases in labor costs – which are reflected in the increases in the deflator – are well below what the CPI grows”, says Rovira. Therefore, wages are not the main determinant of the CPI increase, but imported energy and food.
The director of the Spanish economy at Caixabank Research, Oriol Aspachs, insists that "the increase in wages is being moderate, which suggests that there will be no second-round inflation for now." That risk is the one that the Bank of Spain always raises to ask precisely for wage containment. The agency fears an inflationary spiral that will also end up having an impact on the financial health of workers. That is why it is requested that there be concrete measures of public support for the most vulnerable groups. Within this process is also located the income agreement that in the end has not been possible.
For the professor of Applied Economics at the UAB, Josep Oliver, the fact that the GDP deflator grows less is a consequence of the fact that companies have absorbed the extra costs from abroad internally. One way to absorb them is by limiting wage increases.
