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MONEY

Rising inflation in Spain: Six cost-cutting ways to fight it

With everything from food to electricity becoming more expensive, people in Spain will spend on average €1,100 more on daily costs in 2022 than the previous year. Here are some top tips for tightening your belt as inflation bites.

Published: 1 August 2022 11:53 CEST
saving money inflation spain
Fruit and veg shops (fruterías) are often far cheaper per kilo than the chain supermarkets, so consider paying them a visit as a way of beating rising costs. Photo: JR Harris/Unsplash

Rising inflation is a problem affecting economies the world over. Economists and politicians are proposing ways to slow inflation, to cut taxes, and to soften the impact on consumers.

In Spain, things are no different.

In late July, Spain’s National Statistics Institute (INE) reported that the Consumer Price Index (CPI) – the index used to measure inflation – rose by 10.8 percent in July, up from 10.2 percent in June and the fastest rate since September 1984, a 38 year high.

READ ALSO: Spain’s July inflation rate reaches new 38-year high

The prices of anything and everything from fruit and eggs to olive oil and petrol have jumped up, and the increases have been particularly pronounced in fuel and utility costs due to the double-pronged pressures of inflation combined with global fuel prices rising as a byproduct of Russia’s invasion of Ukraine.

Electricity costs have been reaching historic highs over the past year, with prices on Wednesday, July 20th, 124 percent higher than the same time in 2021, according to recent data from OMIE, operator of the Iberian energy market.

According to a survey by Sigma Dos, 43 percent of Spaniards have been forced to cancel, shorten, or change their holiday plans for the months of July and August.

And then, on top of all that, the European Central Bank (ECB) announced last week that it is raising interest rates at the end of July, in order to try and slow inflation, which will have a direct impact on consumers paying back loans and mortgages.

READ ALSO: How will rising interest rates affect my life in Spain?

According to the Family Budget Survey (EPF) conducted by the INE, the average Spanish family’s spending on food has increased by €620 year-on-year.

All in all, the perfect storm of pressures of family budgets has hit hard in Spain.

That in mind, The Local has put together a list of tips to help you fight inflation and save some money in Spain this summer.

1. Natural light

Spain is well known as one of the sunniest countries on the planet. Not only does its roughly 15 hours of light a day make it hot during the summer, but it also means there’s an abundance of natural light.

With electricity bills through the roof, an easy way to save on energy is to keep the lights off during the day and take advantage of the light by keeping curtains and blinds open.

It’s worth remembering, of course, that many properties in Spain are built to withstand the scorching summer temperatures, and, as a result, may have rooms that are dark and gloomy in order to keep the temperature down.

Though that’s good for the heat, it’s not ideal for energy savings.

If that’s the case, and you really need to put the lights on during the day, consider switching to LED bulbs, since they can save as much as 80 percent on the bill compared to traditional bulbs, and they last much longer – years longer, in some cases.

2. Regulate the aircon 

Keeping the curtains and blinds open may be good for saving on electricity bills, but what about the heat?

With Spain in the midst of record-breaking summer heatwaves, during the hottest months Spaniards are dependent on their fans and air-conditioner units.

Regulating your use of air-con can help you save on bills. The ideal temperature should be between 24C and 26C and remember that for each degrees you drop the temperature, the energy output goes up by around 8 percent.

READ ALSO: Ceiling fan vs air con in Spain: Which offers the better price-coolness ratio

At night, many Spaniards opt to open the windows and keep the room ventilated as opposed to falling asleep with the aircon or fan on and racking up the bill.

READ ALSO: Spain to cut electricity tax by half to ease inflation pain

3. Shop around

An age old saving trick: shop around. 

Food prices in Spain have jumped over the course of 2022.

According to INE figures, in June the prices of 46 household products were more expensive and above the overall CPI rate of 10.2 percent.

These include eggs (23.9 percent more expensive); butter (23.1 percent); whole milk (21.1 percent); fresh fruit (19.3 percent); baby food (16.7 percent), poultry meat (14.1 percent), bread (13.9 percent); beef (13.1 percent) and or cheese (10.5 percent).

Being more creative with your shopping can help save on prices.

Fruit and veg shops (fruterías) are often far cheaper per kilo than the chain supermarkets, as are discount shops like Lidl and other local supermarkets. Consider going to the butcher (la carnicería) to save on meat.

Before going shopping, look online and compare prices between the different supermarkets. Make a list, and consider going for the supermarket’s line of own-brand products as opposed to more expensive brands.

As a famous British supermarket chain always reminds us – every little helps

4. Loyalty cards

That in mind, another way to soften the impact of inflation is to take advantage of promotional offers and loyalty cards. Spanish supermarkets often have 2×1 or 3×2 promotions, discounts, and savings when buying in bulk – particularly on dairy and poultry products. 

Consider getting loyalty cards at your local supermarket to make savings, and even at clothing stores, hairdressers and restaurants if they offer them. Loyalty cards not only offer discounts; you can often accrue a free service or product – shopping delivery, haircut, meal – by giving them repeat business.

5. Washing machine – know the peak and off-peak hours

With electricity bills historically high, Spain suffering heatwaves throughout the summer, and all this talk of fans and air-conditioning and keeping rooms ventilated, knowing the peak and off-peak electricity tariffs in Spain is an essential way to make savings and help right inflation.

The washing machine is well known as an appliance that uses a lot of electricity and takes a long time. With bills skyrocketing, and the price of electricity on the wholesale market exceeding €200 per megawatt hour (MWh), rising to €300/MWh during peak hours of the day, many Spaniards have taken to using their washing machines at times of the day that offer the cheaper tariffs.

READ ALSO: Inflation hack: what time should I use the washing machine in Spain?

From Monday to Friday, the cheapest time to use the washing machine is during the flat and off-peak slots. It may not be ideal, but by putting the washing machine on during the night, from 00:00 to 8:00 (off-peak), or in the morning, from 8:00 to 10:00 (flat), the kWh price can be significantly lower than during peak hour.

Similarly, another good time to use the washing machine, and perhaps the most convenient without being too costly, is after lunch from 2:00 p.m. to 6:00 p.m during another flat-rate session.

Fortunately, weekends and holidays correspond uninterruptedly with the off-peak time slot and there is, as a result, very little variation in prices depending on the time of day you use the machine, so you can wash your clothes at the weekend with worrying about racking up a huge bill.

Peak and off-peak times: 

Horas punta – peak hours (most expensive): 10-14:00h and 18-22:00h on weekdays.

Horas valle – off-peak (cheapest): 00-8:00h on weekdays; 24h on weekends and national holidays.

Horas llana flat rate (intermediate tariff): From 8-10h, 14-18h and 22-24h on weekdays.

6. Electronic devices

Although the pandemic jump started the working from home trend (teletrabajo in Spanish) and has many advantages, in the context of record-high inflation and utilities bills, it also has its negatives, like increased bills because you’re continuously using electrical devices such as computers.

If you work from home, consider using LCD screens – which save, on average, up to 37 percent more energy than normal screens – and try not to leave devices on standby.

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WORKING IN SPAIN

Why the Basque Country is Spain’s industrial powerhouse

Mining roots stretching back centuries, an astute transition to R+D, locally-run companies, and a special fiscal agreement with the government. When it comes to industry and jobs, the Basque Country is just different to the rest of Spain.

Published: 9 April 2024 10:20 CEST
Why the Basque Country is Spain's industrial powerhouse

The Basque Country is something of an exception in Spain. It’s one of the country’s smaller regions, with a little over 2 million people living there, yet also has one of the lowest unemployment rates in the country and the second highest per capita income after Madrid.

Much of this economic strength comes from a centuries-long industrial history in the Basque Country, as well as a bespoke fiscal agreement with the national government that gives the region greater control over taxes. In recent decades, it’s overtaken Catalonia to emerge as arguably Spain’s real industrial powerhouse.

Though it’s not what it was, industry is still the main economic motor in the Basque economy, making up almost a quarter (23.1 percent) of GDP according to INE data from 2022, meaning it’s the region with the second largest share behind only neighbours Navarre.

It also has a high percentage of people working in industry, 18.5 percent, which is well above the national average (11 percent) and it is also far and away Spain’s strike capital, accounting for around half of all industrial action in Spain. 

READ ALSO: Why the Basque Country is the strike capital of Spain

Though historically Barcelona was Spain’s industrial base for many years, a combination of factors have propelled the Basque Country to its status as Spain’s industrial powerhouse in recent decades.

As is often the case with this northern region, the Basques do things slightly differently to the rest of Spain. It has used its pre-existing industrial heritage to take advantage of new technologies, keep industrial hubs at home, introduced effective traineeships and career paths to keep the industrial motor going with local staff, all while benefiting from the regimen foral (chartered regime) that gives the region a level of fiscal autonomy (some would say unfair advantage) from the central government.

Industrial roots

But this is nothing new. The idea of the Basque Country as an industrial powerhouse goes back centuries to the mining industry. From as early as the 14th century, Basque iron-ore mining contributed to economic growth that outpaced many other parts of Spain, and then, in the 18th century, Basque industry shifted its attention to the steel industry.

Around a century or so later, in the 19th century, blast furnaces allowed Basque’s to export iron in bulk quantity, mostly to the UK. As a result of this thriving export business, the Basque Country underwent a period of industrialisation which not only boosted steel production due to increased iron ore production, but it also put Basques firmly in the tool and machinery industry and set the region up for a strong industrial future.

The Basque Country’s mining roots stretch to the 14th century. (Photo by CESAR MANSO / AFP)

Technological transition

One of the main reasons the Basque Country has emerged as an industrial power is its adaptability. Fernando Barciela, a long-time contributor to El País’ business section, has written on this transition, and how the industrial past set the Basque Country up for success in the future: “In the Basque country, the old blast furnaces, steel industries and tool manufacturing companies of that period have been transformed into a high-tech industrial infrastructure, which includes the automotive and aeronautics sectors, as well as new energies, [and] machine tools.”

As Barcelona’s industrial power wanted at the end of the 20th century, the Basques positioned themselves at the cutting edge of global industry and have established a highly successful export industry, something that contributes to the region’s wealth overall.

READ ALSO: Why are the Basque Country and Catalonia so rich compared to the rest of Spain?

Barciela notes that “they [Basque companies] export between 70-90 percent of their production, achieving surpluses for the region’s trade balance, of some €5 billion in one of the last few years.” Long-term investment in technology and R&D from the regional government has helped solidify the Basque Country as one of the most innovative parts of Europe.

As such, the Basque Country boasts the headquarters of major international industrial names like Iberdrola, Tubos Reunidos, Aernnova Aerospace, Arcelor, Cie Automotive, Irizar, Mondragón, and ITP Aeronautica, among many others. And unlike any other regions that have multinational companies based there, or indeed other countries, the majority of the companies based in the Basque Country are owned and run by long-established Basque families, many of whom work together.

There are also apprenticeship schemes to help local youngsters join industries easily and a more balanced population distribution across the Basque Country as R+D plants and factories are found in smaller towns and villages, not just close to the big cities of Bilbao and San Sebastián.

Barciela also suggests that the Basque Country’s industrial base (and economy more broadly) was insulated from the worst effects of the financial crisis and “it was also a great help that the Basque savings banks were saved from the property bubble. This meant that most of them avoided going bust.”

While around the rest of the country most banks focused on property and mortgages, “the Basque savings banks continued to support industrial projects developed by the companies and backed by the government in Vitoria.”

Bilbao’s port is the most important in northern Spain. Photo: ANDER GILLENEA/AFP

The future

However, the future isn’t entirely rosy for Basque industry or its economy. According to Spanish public broadcaster RTVE, the region’s economic activity rate is falling and is currently lower than the national rate (57 percent compared to 59 percent nationally).

Similarly, the decreasing weight of its regional GDP in terms of the national economy, and the combination of an ageing population and a worsening public health system, all indicate that changes could be needed in the future. These sorts of structural changes will be costly and could impact on the Basque Country’s position as one of the wealthier regions of Spain. Though with its regimen foral it is unclear how big of an impact this will have.

Even the traditional high wages in the Basque Country are falling closer to national levels. Jon Bernat Zubiri Rey, professor of Economics at the Universidad del País Vasco, told RTVE that in “the Basque Country there was a large wage differential in relation to Spain, but this has tended to decrease” in recent years.

Similarly, the Basque economy itself is beginning to change. Though its industrial base is so well established that it will always likely form the backbone of the Basque economy, the tourist sector, traditionally not as integral there compared to other parts of Spain, has grown since the disbandment of ETA and pivoted to the tourist sector, perhaps most notably with then opening of the Guggenheim museum Bilbao in 1997.

Basque hotels registered 3.6 million check-ins in 2023, 10.4 percent more than in the previous year.

The Basque Country is also having a slower post-pandemic economic recovery than most regions. In 2023 the regional economy grew by 1. percent, well below the national average of 2.5 percent.

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