The increase in the cost of inputs directly generated an increase in unit labor costs

MADRID, 28 Ago. (EUROPA PRESS) -

The companies transferred, on average, to their sales prices a "substantial" part of the increase in their production costs in 2022, although not equally, since in some sectors this upward transfer "would have been slower".

This is stated by the Bank of Spain in an article in which it analyzes the impact of the increase in production costs on the sale prices of non-financial companies in 2022.

The institution underlines that the "strong" increase in the price of energy and other raw materials in the second half of 2021 and a good part of 2022 implied a "notable" increase in the production costs of companies, which transferred a substantial part of this increase to their sales prices, but not in a heterogeneous way.

In fact, it points out that in most of the main economic sectors there was a very high, "practically complete" transfer of higher production costs to sales prices in 2022, both with respect to 2021 and in comparison with the existing situation. in 2019, before the pandemic.

In the electricity and gas sector and in the oil refining sector, sales prices grew more than their adjusted unit costs, as in the transport and storage sector and in the hospitality sector during the period 2021- 2022.

"This high transfer rate could be due to the fact that the strong recovery in demand experienced in 2022 in both sectors, after the lifting of the mobility restrictions introduced to slow the spread of the pandemic, would have put pressure on sales prices," the statement said. Bank of Spain.

Compared to 2019, in addition to electricity, gas and oil refining, the wholesale trade and construction branches raised their sales prices to a greater extent compared to the increase in unit production costs.

In the branches in which prices are "historically more rigid", the transfer of the rise in production costs to sales prices was slower.

Those economic activities with greater intensity in the use of energy, such as the branch of the metal transformation industry and the chemical industry, registered a more intense increase in unit costs than in the rest of the manufacturing subsectors.

Along the same lines, a sharp increase in unit production costs was observed in the energy and oil refining sectors.

However, the Bank of Spain also points out that there were exceptions. Thus, the branch that includes the food and textile industries would have experienced "substantial" increases in their unit production costs in 2022, despite not appearing among those in which energy costs have a higher weight in their costs.

According to the institution, this would be indicative that these sectors use other raw materials whose prices have also increased "notably", partly as a consequence of the increase in the cost of energy, "significantly pushing up their production costs".

Conversely, the transport and storage sector, whose energy costs are significant, not only did not register a rise in its unit costs, but also reduced them slightly between 2021 and 2022.

"This can be explained, at least in part, because in many of the companies that are dedicated to transport, the combination of high fixed costs with the fact that, in 2022, once mobility restrictions were eliminated, these companies would have experienced An extraordinary increase in their activity led to a reduction in unit fixed costs that would have allowed them to absorb the increase in variable-rate energy costs that occurred in this period," the institution notes.

In any case, the Bank of Spain specifies that some of the price indices used in this article may contain measurement errors, so the quantitative results of the analysis "should be taken with some caution."

According to the institution, although the increase in the cost of inputs has a positive impact on sales prices, its impact on the actual volume of sales is negative. "This last effect reflects the drop in demand as a consequence of the price increase," he points out.

On the other hand, the Bank of Spain finds that the direct impact of higher production costs on employment and average wages is nil, due to the "rigidity" of these variables in the short term.

"Since the increase in prices produces a drop in production with the same employment, this translates into a decrease in labor productivity. On the other hand, since there are no effects on employment and average wages, the wage bill does not is affected, but the fall in productivity generates, in the short term, an increase in the unit labor cost", he summarizes.