One in ten families in Spain can’t afford basic expenses

The rise in the cost of living is affecting vulnerable households the most. This is shown by a Bank of Spain report published on Thursday 6 July in which it shows that in 2020, some 7% of households could not cover their essential expenses with their total gross income, a percentage that rose to 9% in 2022.

Inflation and interest rates are eating away at the improvement that had been observed in the levels of income and financial wealth. A concern is that many households will enter into a precarious situation.

It is clear that high inflation and the monetary policy of the European Central Bank is having a marked affect on the financial situation of families despite the fact that gross disposable income was 6.8% higher in 2022 than in 2020. “Inflation has caused a loss of that accumulated purchasing power of 4.5% in that period, which has limited the saving and spending capacity of Spanish families,” the report stated.

Between August 2021 and September 2022, the inflation experienced by 30% of the lowest-income households was 11.3%, compared to 9.7% in the case of 30% of the highest income households. The report also found that the most vulnerable families dedicate 55% of their income to spending on basic necessities, such as food and basic supplies, compared to 30% of average incomes.

Despite the uncertain outlook, in general terms, households are now more prepared than years ago to face the crisis due to lower levels of indebtedness. And, the strong loss of purchasing power experienced in recent times has begun to moderate. This improvement comes underpinned, according to the Bank of Spain, by the resistance of the labour market, with “the increase in nominal wages and the lower inflation of consumer prices”.