Company turnover falls in the third quarter and "disinflation" is delayed due to the rise in production costs

Spanish companies are already noticing the economic slowdown that most analysts warn of for the coming months.. There are more and more companies that declare that their turnover has been reduced and those that report a rise in their production costs are also increasing.. To the point that there are already “signs of pause in the disinflationary process” in this third quarter.

These are two of the main conclusions of the quarterly survey that the Bank of Spain carries out on Spanish companies to find out how their activity has evolved and their prospects in the short and medium term.. The latest edition, released this Monday by the banking supervisor, also focuses on the increasing problems in obtaining labor declared by Spanish companies.

The survey of businessmen indicates that turnover between July and September has fallen compared to the previous quarter. 29% of the firms surveyed indicate that their turnover was reduced in the third quarter, six points more than those who saw it this way in the second quarter. Of course, it is expected that in the final three months of the year sales can regain some strength.

The sectors that have most noticed the slowdown in activity are agriculture and industry, which have already had more than five quarters of declines in billing.. These two sectors contrast with the strength of tourism and information and communications services, a sector that has been increasing its sales for two and a half years.

The worse billing data explains, in part, the lower employment growth recorded during this quarter. The percentage of companies that said they had increased hiring decreased from 21.6 to 18.6% compared to the previous quarter. In this case, companies' expectations for the end of the year are for an even greater slowdown, but with growth in employment, after all.

But perhaps the most worrying sign has to do with the evolution of prices expected by businessmen.. The survey reflects that companies have once again observed a rebound in their production costs after three consecutive quarters of declines. The percentage of firms that declared they had suffered an increase in the cost of their inputs—the goods or services they need to produce—grew to 58.4% (ten percentage points more than in the previous wave of the survey).

This increase in production costs is also being transferred to the sales prices set by the companies.. After a considerable drop in the second quarter, the sales price indicator has remained practically the same in the third quarter. One in four firms claims to have raised prices between July and September and the prospects for the final part of the year are for a new rebound.

Future expectations are not very promising either.. Two thirds of businessmen believe that within a year they will have higher production costs than current ones (10.5 points more than in the second quarter). Along the same lines, the number of companies that expect to raise sales prices in the future also increases – although more slightly.

Labor and energy, growing problems

The rise in the price of energy raw materials experienced during the summer – the barrel of Brent has soared by 28% compared to the beginning of the summer and continues to rise – is weighing down companies. Two out of three companies declare a negative impact of energy on their activity, nine percentage points more than the previous quarter. An impact that is widespread in all sectors, but that is felt particularly strongly in transportation and hospitality.

After energy costs, uncertainty about economic policy is the second factor that most limits activity, although it is close to historical lows. But the problem that has grown the most in recent months is that of labor, a factor that limits the activity of 39% of the firms surveyed, almost double that of two years ago and five points more than just three months ago.. The sectors where the most companies complain about labor availability problems are hospitality and construction, where more than half of the companies declare they are in that situation.

Furthermore, the labor shortage is already having effects on the decisions of the companies that suffer from it.. 40% of firms that have this problem declare that they have reduced planned hiring, a phenomenon that occurs especially among large companies.. Likewise, 38% of companies with labor problems acknowledge that they have had to raise salaries to obtain or maintain labor.

On that occasion, the Bank of Spain has gone further and has asked employers who cannot find workers the reasons why they are unable to fill these vacancies. The most repeated response was the lack of qualified profiles to fill the position, something especially pronounced in jobs that require a Vocational Training degree.