Productivity, however, continues to be weak, compared with the average across the EU, with the issue having worsened over the past 10 years or so.
ADVERTISEMENTThe final estimate for Spain's year-on-year inflation figure for August came in at 2.3%, according to the National Statistics Institute (INE), a drop on July's 2.8% but still above analyst forecasts for 2.2%.
The drop was mainly because of food and non-alcoholic drink costs growing at a slower pace, easing to 2.5% in August, down from 3.1% in July. Alcohol and tobacco costs also fell to 3.6% in August, down from July's 3.7%.
Restaurant and hotel costs dropped to 4.6%, down from 4.7% in July, while footwear and clothing costs slowed to 0.7% in August, down from 0.9% in July.
Inflation was up in the recreation and culture sector, however, hitting 2% in August, versus 1.6% in July. Housing and utilities prices also increased to 4% in August, up from 3.2% in July.
Productivity woes still pulling Spain back
The European Commission recently said in its 2024 country report on Spain that productivity continues to be weak in Spain, compared with the average across the EU, with the issue having worsened over the past 10 years or so.
This is reported to be due to a number of different factors including disappointing business, innovation and research investment, as well as falling knowledge transfer from scientific fields to business ones.
Ongoing skill shortages, together with the increasing fragmentation of the domestic market have also contributed significantly to this phenomena.
Matters been made worse by increasing regulatory barriers for small and medium-sized enterprises, hampering growth, as well as limited access to equity funding.
However, despite the challenges, the Spanish economy seems to have remained relatively strong.
In June, the International Monetary Fund (IMF) said as part of its Spain 2024 Article IV consultation: "The Spanish economy has been resilient to successive shocks, whose effects were mitigated by unprecedented policy support that is now being phased out.
"The labour market performance has been exceptionally strong, and some of its perennial deficiencies - most notably, the large share of temporary workers and high unemployment - have eased.
"Growth is projected to reach 2.4% in 2024, and headline and core inflation are expected to converge close to the ECB's target before mid-2025.
"Risks have become more balanced, but are still tilted to the downside for growth and the upside for inflation, including predominantly domestic risks (political fragmentation, under-execution of Next Generation EU (NGEU) spending), but also global risks (energy price volatility, geopolitical risks, geo-economic fragmentation)."
