Purchasing power increased in Spain in 2023

Spain is the second-largest economy in the EU, with wages losing the most purchasing power since 2019. Although wages have not yet regained all the purchasing power that was lost in recent years of unprecedented price increases, things are moving in the right direction. 

Last year, the average wage in Spain rose by 4.7%, while consumer prices rose by 3.5%. This represents an increase in purchasing power of 1.2%. The average wage was €26,556, according to the annual labour cost survey for the year 2023 published by the Spanish statistical agency INE earlier this week.  

Increase in average salary 

The growth in average salary in 2023 was pretty much the same as in 2022. But, in real terms (i.e. in terms of increased or decreased purchasing power), salaries suffered from a strong devaluation. With inflation averaging 8.4%, wages rose by only 4.6%. In contrast, wages rose by 1.2 percentage points relative to prices in 2023. 

Upward trend looks set to continue in 2024 

This upward trend looks set to continue into 2024 as well, judging by the data that has come in so far. According to the quarterly edition of this survey, hourly wages increased by 4.2% in the first quarter of the year compared to the same period last year. In that period, price increases were around 3.2%, so there was even more profit at the beginning of this year. 

Restore purchasing power 

However, the gap that has opened up in recent years has not yet been officially closed. At least as far as wages are concerned, because household income is above pre-pandemic levels. In a recent OECD report, Spain is at the bottom when it comes to restoring real wages. Of the 27 EU countries, only Denmark, Finland, Italy, the Czech Republic and Sweden have experienced a greater devaluation. 

The recovery of purchasing power will be a key factor for economic growth this year and next. If wages continue to rise, price increases moderate and policy rates fall, consumption should accelerate and GDP should rise again. 

 Also read: Spanish goverment increases the minimum wage