Spanish improvement in competitiveness over price when compared with European Union

In contrast, the appreciation of the Euro against the OECD countries - in spite of being less than the appreciation posted in the previous quarter - is detracting from our competitiveness and is not offset by the moderate growth seen in Spanish consumer prices when compared with the high average rate of inflation in the other OECD countries.

When considering the CTI calculated using the Export Unit Value (UVI) in the first quarter of 2014, a loss in competitiveness was posted vis-à-vis the EU as a result of appreciation by the Euro and the falling average export prices from the majority of EU countries, compared to a slight increase posted by Spanish export prices.

However, when compared with the OECD countries and in spite the moderate increase in Spanish export prices standing lower than the average increase posted by the OECD, the gain in price competitiveness was not sufficient to offset the effect caused by the appreciation of the Euro, thus leading to a loss of competitiveness when compared with these countries.

CTI calculated with CPI: second quarter of 2014

Compared with the European Union

Compared with European Union countries (EU-28), the CTI fell by 0.8% year-on-year in the second quarter of 2014. This is the third consecutive quarter that the comparative rate has been negative. This gain in competitiveness was the result of a 0.8% drop in the relative consumer price index while the exchange rate index remained constant.

Compared with the Eurozone (EMU-18), the CTI also fell by 0.5% in the second quarter of 2014 on the same quarter of the previous year, as did the relative consumer price index.

Compared with non-Eurozone European Union countries (EU-28 as opposed EMU-18), the CTI fell by 1.6% in the second quarter of 2014 (it rose by 0.1% in the previous quarter). This gain in competitiveness was mainly the result of a 1.6% drop in the relative price index in the second quarter of 2014 (-0.8% in the first quarter of 2014), while appreciation of the Euro slowed in reflection of a slight increase of 0.1% in the exchange rate index (0.9% in the previous quarter).

In the first six months of 2014, Spain gained competitiveness when compared with these three regions due to the low inflation when compared with the average rate of inflation posted by the countries of the three regions.

Compared with the OECD

The CTI against the OECD rose by 1.3% year-on-year in the second quarter of 2014. This loss in competitiveness is the result of the appreciation of the Euro against these countries, with growth of 2.8% in the exchange rate index given that the relative price index fell by 1.5%.

Compared with non-EMU-18 OECD countries, the CTI rose by 2.6% in the second quarter of 2014. In this case, the loss in competitiveness is also the result of a 4.9% increase in the exchange rate (continued appreciation of the Euro, although to a lesser degree than in the previous quarter), which was not offset by the 2.2% drop in the relative price index.
In comparison with the non-EU-28 OECD, the CTI also rose by 3.7% year-on-year in the second quarter of 2014. As was the case in the previous regions, this loss in competitiveness was a result of the increase in the exchange rate index by 6.2%, compared with a 2.3% drop in the relative price index.

The appreciation of the Euro is preventing a gain in competitiveness in these regions, in spite of the lower rate of inflation in Spain compared with the average rate of inflation in these countries.

Compared with BRICS countries

Compared with BRICS countries, the CTI increased by 5.4% in year-on-year terms in the second quarter of 2014. This loss of competitiveness is the result of an upward trend in the exchange rate index, which rose by 9.3% (8.6% in Q1 2014), versus the 3.6% drop in the relative price index (also down by 3.6% in Q1 2014).

The average rate of inflation in the BRICS countries has been higher than Spanish inflation since the fourth quarter of 2006, but the appreciation of the Euro has prevented a gain in competitiveness when compared with these countries. In the second quarter of 2014, the loss of competitiveness when compared with these countries can also be explained by the appreciation of the Euro compared with the same period in 2013.

CTI calculated with UVI: Q1 2014

Compared with the European Union

Compared with the European Union (EU-28), the CTI increased by 1.6% year-on-year in the first quarter of 2014. This loss of competitiveness was caused by the 0.2% rise in the exchange rate index and the 1.4% increase in the relative export price index (the year-on-year rate of Spanish export prices is higher than the average year-on-year rate for export prices from the EU-28 countries).

The CTI calculated against the Eurozone (EMU-18) rose by 1.3% in the first quarter of 2014. This loss of competitiveness was due to the relative export price index increasing by the same amount.

Compared with European Union countries not belonging to the Eurozone (non-EMU-18 EU-28), the CTI increased by 2.7% in Q1 2014. The exchange rate index and the relative export price index rose by 0.9% and 1.8%, respectively, leading to a loss of competitiveness against this region.

The loss of competitiveness against these regions is not only due to the appreciation of the Euro but also to the greater increase in Spanish export prices compared with the average year-on-year variation in export prices from these countries.

Compared with the OECD

Compared with the OECD countries, the CTI rose by 3.7% year-on-year in the first quarter of 2014. This loss of competitiveness was due to the exchange rate index rising by 4%, since relative export prices fell by 0.3%.

Compared with countries not belonging to the Eurozone (non-EMU-18 OECD), the CTI posted an increase of 5.5% in the first quarter of 2014. In this case, the relative price index fell by 1.4% while the exchange rate index rose by 7%.

Finally, compared with non-EU-28 OECD countries, the CTI increased by 6.4% in Q1 2014. This loss in competitiveness was due to the 8.7% increase posted by the exchange rate index, in spite of the 2.2% drop in the relative export price index.
In this case, the strong appreciation of the Euro led to a loss of competitiveness against these regions, in spite of the gain in price competitiveness given that Spanish export prices rose by less than the average year-on-year variation in export prices from these countries.