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The industry transfers record energy and import costs to customers

Imports from Spain (everything bought abroad) rose by 25% in the first quarter, compared to the same period last year, according to the Fedea Center for Analysis. The escalation, which is causing both industry and the service sector, is experiencing record-breaking costs, according to S&P Global, in its April reports on its PMI activity indicators when “this shock” adds to the sharp rise in energy – in particular. Since Russia began invading Ukraine in late February.

These same reports from S&P Global indicate that companies are handing over a large portion of these costs to customers at record levels, forcing some factories to close temporarily or postpone jobs or projects in the most critical situations. “Manufacturers are raising prices at a record pace as costs skyrocket (see chart),” says a document dedicated to the industry by S&P Global.

“Expensive pressure remained due to high energy bills […] It has affected various companies across the tertiary sector, which in turn has led to another historically significant increase in sales prices, ”adds a report by the Debt Rating Agency, which focuses on service activity in Spain in April.

“The level of input orders [bienes intermedios que se usan para fabricar otros productos u ofrecer un servicio] It rose after falling in March, but it only did so slightly as some companies stopped high prices. However promotions [almacenamiento] The number of deposits continued to grow, making it one of the fastest-growing records as companies continued to pursue security stock policies, ”S&P Global said.

Meanwhile, pressure on world trade supply chains remained strong in April and delivery time for industrial goods “continued at a historically significant pace,” the agency continued. Businesses have blamed delays on the impact of the recent transport strike, global product shortages, the Ukraine war and the new COVID closure in China. However, the magnitude of the delays was the lowest in the last 12 months. Concludes.

These findings, reflected in inflation of 9.8% in March, a record high in 1985 and an 8.4% acceleration in April – if energy and unprocessed food are excluded, up to a maximum of 1995 – negate price competition between companies. , Which is exactly what various experts have warned that the government should control.

On the other hand, these analyzes do not address whether there is an increase in wages as well. But, “at the moment, there are no obvious indications that this is happening,” explains Angel de la Fuente. Executive Director of the Foundation for Applied Economics Research (FEDEA). This means that companies maintain their profit margin (ability to receive revenue after expenses are incurred, including employee compensation) in the event of an emergency.

The economist himself warns that “a significant risk is that rising consumer prices will shift to wages, triggering an inflationary spiral that feeds on itself.”

Although the loss of purchasing power and uncertainty is already evident in the economic growth data for the first quarter recently published by the National Institute of Statistics (INE). Household expenditures fell 3.7% in January-March compared to the fourth quarter of 2021, according to advanced GDP data.

In this context, more delicate and disturbing is the failure of negotiations between employers and trade unions on the Income Pact, an attempt to offset the inflation loss through multi-year wage agreements between companies and workers, which will take two to three years. Alleviate loss of consumption ability.

“The most important channel for transmitting the economic effects of the Ukraine crisis to other countries has been, so far, the strong rise in prices in international markets for energy and other essential raw materials, such as grain and certain metals. Explains Angel de la Fuente.

“Because both Spain and the vast majority of European countries are large net importers of energy and raw materials, rising prices have a significant macroeconomic effect,” the Fedea economist said.

De la Fuente offers two interesting calculations. First, a 25% increase in import prices from January to March 2022, compared to the first quarter of 2021. And second, “a direct and immediate impact on the actual income of such a breach before companies and households respond. By adjusting the amount of imported goods they consume or use as intermediate goods.”

“In principle, therefore, we are talking about the potential impact of rising import prices on revenue, not its final impact, which will also depend on the reaction of economic agents and the policy adopted by the government,” he explained in detail. And says that the price shock accumulated in recent quarters will be very significant and amount to about 7 points of GDP. [potenciales]”.

“As economic agents look for ways to minimize the damage done by each, it is expected that the final effect will be less than the initial shock,” he explained. It does not help, yes, the depreciation of the euro, which makes imports even more expensive at the exchange rate.

Among the ways to mitigate the coup, the government recently approved a temporary shock plan, by June. And Angel de la Fuente thinks that if it is renewed, it should pay attention to specific measures for the most electrified industries (metallurgy, transport, ceramics …) and the most vulnerable families. “Because general discounts on fuel or tax cuts are ineffective.”

In recent weeks, large-scale industry has been backing the government’s third vice president, Theresa Ribera, and restricting gas electricity, but they are demanding that the minister force energy companies to auction off cheap energy. The same Monday, the European Commission issued a limit permit for Spain and Portugal.

This is temporary, for 12 months, it will be not 30 euros, as requested by Madrid and Lisbon, but an average of 50 euros, but involves the implementation of a measure that will reduce the electricity bill by imposing a gas price limit. To make its impact less than the electricity bill. In addition, the Iberian Peninsula will be the only place in the EU where it will be implemented in practice.

Source: El Diario





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