According to the survey on business activity (EBAE) carried out by the Bank of Spain, throughout the second quarter of the year there has been an increase in company turnover, although slightly lower than estimated three months ago. From the analysis offered by the monetary authority, the high heterogeneity of activity by sector becomes clear. The services branch, which during the pandemic was the most punished, now has to be the most benefited by the elimination of the restrictions put in place against Covid. That is why the information and communication sector is added to the hospitality, transport and leisure industry, which has already experienced positive behavior since the start of the health crisis. On the other side of the balance are agriculture and administrative activities.
However, the reason for concern that can be extracted from this work carried out by Alejandro Fernández and Mario Izquierdo comes from the price variable, both in terms of production costs and the output of finished products for sale.
Despite the fact that the height of inflationary pressures may have subsided, the truth is that the vast majority of companies, specifically 76.8% of the total, continue to show continuity in the additional increases in the prices of their inputs productive in the second quarter, although it represents 5 percentage points below the records of the previous quarter.
By branches of activity, the slowdown in cost pressures is widespread, with the exception of construction and the hotel industry, where a new intensification can be seen. This is nothing more than the consequence of the increase in demand in the tourism sector, in the case of the hotel industry, and of price tensions in materials, as a consequence of the effects of the war in Ukraine, together with a pull in the demand for housing, which has been acting as a refuge value in the midst of inflationary pressures due to the consequent depreciation of savings that now seek the support of the brick. 73.2% of the companies, also with a slight decrease, foresee additional increases in the cost of their inputs in the third quarter.
The worst of the data, however, is that, a year ahead, the vast majority of the companies consulted predict that the pressure of input costs will continue to be high. 72% of the companies are not optimistic in the face of this evolution, so they maintain that their costs are higher than the current ones, which is a risk in itself for their transfer to finished products, fueling further inflationary pressures.
Although the estimates published by the Bank of Spain foresee a certain moderation in prices, after the maximum levels of 2022, the truth is that just over half of the companies surveyed, 54%, foresee in a horizon of one year raising sales prices, although it does not reflect an increase in these opinions as this percentage was reduced by 9 points.
Due to the labor variable, additional tensions will come, since 67% of companies expect increases in their labor costs within a year. Costs that, as reflected in the agreements made known on Friday, are relatively contained, with the consequent loss of purchasing power when the average salary increase was established in May at 2.42%. Although everything points to an improvement, the uncertainty due to the war in Ukraine sets trends.
Evolution of business margins
The quarterly report published on Friday by the Bank of Spain highlights how corporate margins experienced high volatility during the most acute phase of the pandemic, showing a slight rebound throughout the first half of 2021 to be contained in the second, as the inflationary rebound intensified. At the end of last year, corporate margins were some 3 percentage points below pre-pandemic levels, more than the gap in other euro countries.
