Inflation Outpaces Wage Growth in Spain, Squeezing Household Budgets

Spain continues to grapple with the economic challenge of inflation eroding the purchasing power of its families. Since 2020, the Consumer Price Index (CPI) in Spain has risen by 22.1%, averaging an annual increase of 4.42%, while wages only increased by 16.7% during the same period. This imbalance has led to a decline in real disposable incomes for many workers, particularly as not all employees have benefited from wage hikes. Essentials such as food have seen steep price increases, with a 34.6% rise since 2020, disproportionately affecting lower-income households.

In 2023, average inflation was 3.5%, expected to moderate slightly to 2.8% in 2024. Despite this easing, Spain's inflation rate remains above the European Union average, having exceeded the eurozone's by one percentage point in November 2025. The inflation surge began in 2021 due to post-pandemic demand outstripping supply and worsened in 2022 with the energy price shocks linked to the Russian invasion of Ukraine, pushing inflation to an average of 8.4% that year. Meanwhile, household savings rates have fallen steadily, dropping to 12% of disposable income in the third quarter of 2025, marking four consecutive quarters of decline.

Carlos Cuerpo, Spain's Minister of Economy, acknowledged these economic pressures while expressing optimism for continued growth and calling for support of entrepreneurship and efforts to ease the housing crisis. His comments underscore the government's awareness of the challenges faced by families and the wider economy.

As inflation remains a key concern at the end of 2025, Spanish households face ongoing strain on their budgets, with slower wage growth and rising essential costs diminishing their purchasing power and savings capacity.