Spain gains price-competitiveness in the third quarter of the year

The significant year-on-year depreciation of the euro in the third quarter of the year, following the trend seen in the first half-year, was the main driver of Spain's gain in competitiveness over the OECD. However, competitiveness versus this zone was also gained through prices, as Spanish consumer prices shrank while average prices in other OECD countries have risen.

If we consider CTIs calculated using Export Unit Value Indices, in the second quarter of the year a gain in competitiveness was recorded versus the EU, versus the Eurozone, and versus the EU countries with which we do not share our currency, mainly as a result of Spanish export prices increasing less than the average increase of the export prices of our EU partners.
Compared to OECD countries we also gained competitiveness, in this case due to exchange rate effects, since Spanish export prices increased slightly, while in OECD country prices fell, due to falling energy product and commodity prices.

CTI calculated using CPIs: third quarter 2015

• Versus the European Union

The CTI calculated versus European Union countries (EU-28) fell by 1.6% year-on-year in the third quarter 2015, making it eight consecutive quarters of gains in competitiveness versus this zone. This improvement in price-competitiveness was the result of both a 0.9% drop in the exchange rate index and the 0.7% decline in relative consumer prices index.

Versus the countries with which we share our currency (EMU-19), the CTI shrank by 0.8% in the third quarter 2015 compared to the same quarter of the previous year. This improvement in competitiveness was due to the drop in Spanish consumer prices versus the slight increase in average Eurozone country prices.

The CTI calculated versus European Union non-Eurozone countries (EU-28 non-EMU-19) fell by 4.2% in this period. The reason behind this gain in competitiveness was the 3.6% drop in the exchange rate index combined with a slight fall in the relative price index (-0.6%).

• Versus the OECD

In the third quarter of 2015, Spain gained competitiveness versus OECD countries, both versus all of them combined and versus those belonging neither to the Eurozone nor to the EU. This makes five consecutive quarters that competitiveness has been gained versus these zones.

With regard to OECD countries as a whole, the CTI fell by 4.1% year-on-year in the third quarter of the year. This gain in competitiveness is the result of a 3.1% decline in the exchange rate index, combined with a 1.1% drop in the relative price index.

The CTI versus non-Eurozone OECD countries shrank considerably in this period, by 6.4%, as a result of the depreciation of the euro and the knock-on effect of a significant drop in the exchange rate index (5.2%). Meanwhile, the relative price index shrank by 1.3%.

With regard to the CTI calculated versus non-EU-28 OECD countries, this index posted a significant drop in the third quarter 2015 (6.9%). As in the previous two cases, this significant gain in competitiveness was due to a major drop in the exchange rate index (-5.6%), together with a falling relative price index (-1.4%).

• Versus BRICS countries

In the third quarter 2015, the CTI versus BRICS countries (Brazil, Russia, India, China and South Africa) posted a significant reduction totalling 7.8% year-on-year, the first time since 2012 that competitiveness has been gained versus this zone for five consecutive quarters. As in the rest of the zones, the gain in competitiveness was due to both a drop in the relative price index, by 5.0%, and a falling exchange rate index, by 2.9% (this fall contrasts with the significant increases posted by this index in 2013 and part of 2014).

The average inflation of BRICS countries has been higher than the Spanish inflation figure since the third quarter 2006, but the major appreciation of the euro against the currencies of these countries in previous quarters made it difficult to gain competitiveness over this zone.

CTI calculated using UVIs: second quarter 2015

• Versus the European Union

The CTI measured against the European Union (EU-28) fell by a year-on-year 2.1% in the second quarter 2015. This gain in competitiveness was the result of a simultaneous drop in the relative export price index, by 1.0% (the year-on-year rate of Spanish export prices is lower than the average year-on-year rate of export prices in the rest of EU-28 countries), and of the exchange rate index, which fell by 1.1%.This is the tenth quarter in a row that competitiveness has been gained versus this zone according to the CTI calculated using UVIs.

Versus the countries that make up the Eurozone (EMU-19), the CTI shrank by 0.9% in the second quarter of 2015. Competitiveness was gained as a result of the relative export price index falling by the same amount. This is also the tenth consecutive quarter that this has happened.

With regard to the European Union countries that do not belong to the Eurozone (EU-28 non-EMU-19), the CTI fell by a greater amount, 5.6%, in the second quarter of the year. Both the exchange rate index and the relative export price index fell, by 4.5% and 1.2%, respectively, which gave rise to a gain in competitiveness in this quarter. This is the fifth quarter running in which a gain in competitiveness versus this zone has been recorded.

The gain in competitiveness versus the EU, the Eurozone and the non-EMU EU was the result of a lower increase in Spanish export prices versus the average export prices recorded by those countries and, except in the case of the Eurozone, also due to the depreciation of the euro in the second quarter of 2015.

Cumulatively in the first half of the year, competitiveness was also gained versus the EU, the EMU and the non-Eurozone EU.

• Versus the OECD

The CTI calculated versus OECD countries fell by 3.4% year-on-year in the second quarter 2015. This gain in competitiveness was due to the 6.0% negative year-on-year rate posted by the exchange rate index, buffered by the 2.7% increase in the relative price index. This makes three consecutive quarters that competitiveness has been gained versus the OECD according to the CTI measured using UVIs.

Versus the countries that do not belong to the Eurozone (OECD non-EMU-19), the CTI showed a 5.1% decline in the second quarter of 2015. The exchange rate index fell by 10.1% while the relative price index increased by 5.5%.

Finally, the CTI versus the OECD countries not in the EU-28 fell by 4.9%. As in the rest of the OECD zones, there was a major gain in competitiveness driven by the exchange rate (this index shrank by 11.5%), offsetting the considerable loss of competitiveness due to prices (the price index rose by 7.5%).

In short, Spain has gained competitiveness measured using UVIs versus all OECD zones compared with the second quarter of 2014, thanks to the strong year-on-year depreciation of the euro versus the currencies of these countries, which offsets the relative increase in Spanish export prices.