The economic climate

In 2021, the economic context was characterised mainly by two elements: The gradual improvement of activity and the rise in prices, both particularly intense in the second part of the year.

The year had a bad start marked by the effects of the third wave of infections and the impact of the Filomena storm. After the first few weeks in which the activity was still below the figures prior to the pandemic, sales were recovering and since August they were firmly above those of 2019. Chart 1,1 illustrates this evolution. The series shown are the daily sales provided by the Immediate Supply of Information on VAT system, the activity indicator available to you with greater proximity to what happens in the economy. As can be seen, until the end of March sales were lower than those of 2019 and 2020, but after that month, it was observed a continuous progression that led to the end of the year with growth above 20% compared to 2020 and 4% compared to 2019.

The improvement of daily sales involved both the real component and price increases, which were accentuated as the year progressed. Chart 1,2 gives a good idea of the effect of prices, especially against the price stagnation in 2020. Since the beginning of the year, a greater nominal dynamism began to be seen, and this difference was accentuated as the months passed. In the fourth quarter prices were able to explain, on average, around 15 points of sales growth. In any case, once prices have been discounted, the last few months of 2021 have already reached above 2019, as shown in Chart 1,3.

Other sales indicators originating from tax information provided similar signals to the previous ones. Chart 1,4 reflects the quarterly evolution of total sales of Large Companies and SME companies in the last three years. Especially in the indicator of greater coverage, that of Large Companies and SMEs, the continuous improvement is clearly seen from the minimum caused by the strict confinement in the second quarter of 2020. Two main facts are highlighted in particular when analyzing the chart: On the one hand, a more consistent progression in SMEs than in Large Companies (due to the greater weight of the former activities that most affected the restrictions throughout the pandemic period) and, on the other hand, the significant acceleration of sales in the part end of the year, closing the last quarter above the 2019 results. In real terms, total sales of Large Companies and SMEs were only 2.3% lower than in 2019.

In the most commonly used aggregate for monitoring the situation, GDP, the two elements mentioned as characteristic of 2021 can also be seen, although they have a lower intensity than the one derived from the tax variables. In real terms, GDP grew by 5.1% in the year, moving from a fall of 0.5% in the first quarter to an average increase of 2.4% in the second half of the year. The nominal GDP, meanwhile, increased by 7.4% in 2021, with an quarter-on-quarter decline of 0.8% in the first quarter and a growth of 4.8% in the last quarter (4.5% in the second half of the year). In both cases the figures for the year were far from 2019: - 6.2% In the first case and-3.2% in the second case. Further away, the nominal non-financial VAB remained, which is a more closely aggregated item than the sales of tax origin. In this case, the year closed almost 10% below what was 2019, a result very different from that of sales. Chart 1,5 includes these three aggregates (real GDP, nominal and commercial VAB) on a quarterly basis and compared to what was the year before the outbreak of COVID.

The other relevant indicator in the monitoring of the financial situation is employment, even if the approach used is very conditional on the effect of the ERTE that influences different sources, and therefore the results and conclusions that can be drawn from them are also different. For example, affiliation began to record growth with respect to figures for 2019 from June and December was already 2% higher than the same month of that year. In the year the average affiliation was slightly higher than in 2019, as shown in Chart 1,6. However, affiliation does not allow the impact of ERTE on the work actually performed to be accurately removed. The hours worked by the National Accounting Department would be the most suitable indicator, but its performance practically stable since the second quarter of the year (just in the period in which activity improved the most) and the strong sectoral changes that have occurred in recent years make it difficult to interpret. Full-time equivalent employment, which is a transformation of hours from full-time average working hours (nothing easy to defining or estimating these years) is not unrelated to these problems (the significant differences between hours and equivalent employment in the last two years quarters of 2021, which can be seen in Chart 1,6, is a good sample of this). In 2019, the National Accounting employment measures in 2021 were below 2019%, although in the case of equivalent employment in the last two quarters they already exceeded the average for that year.

The tax indicator of employment, the number of recipients of remuneration for the work of the tax returns on withholdings of the Large Companies companies and SMEs, followed a path along the same year as the National Accounting for employees equivalent to complete time in non-financial business activities (this detail is important because we have to remember the different behavior of public employment in the last two years). Chart 1,7 shows this similarity and the difference with salaried affiliates, with different treatment, as mentioned above, of ERTE. Only the latter reached levels of 2019.

As regards the second characteristic feature of the year, the evolution of prices, Chart 1,8 clearly illustrates their peculiar performance through the two basic indicators: The Industrial Price Index (IPRI) and the CPI. The sharp rise that has already occurred since the first few months of 2021, particularly in comparison with the negative rates that had been the trend of 2020, as a result of the collapse caused by the confinement in much of the world. The recovery is seen both in the PRI and the CPI, although the intensity is very different (note the difference in the scales). Price acceleration is also more pronounced when monthly data is analysed than when the full year is assessed. In annual terms, the general CPI ended one year with an increase of 3.1% (0.8% the underlying CPI, which does not include products energy and unprocessed foods), with half of the year remaining on average below 2% and including a bullish trend for being based the measurement of electricity prices in the regulated rate (in fact, the deflator of private consumption in National Accounting only grew 1.9% in 2021).

It is also worth highlighting two facts linked to this evolution of prices. First, most of the rally has to do with the considerable increase in energy prices that took place since March (see Figure 1,9), although since the previous downward trend had changed. 2020 And secondly, even taking into account the importance of the energy factor, the performance of the PRI without energy shows (Figure 1,10) that the inflationary process had a more general character. Industrial prices have started to recover the growth rates prior to the pandemic in the last few months of 2020 and since the first few months of 2021 they presented a clear growing trend, although this was not reflected in the core of consumer prices until almost the end of the year (the CPI without energy only rose above 2% in December, and the same happened with the underlying CPI). Industrial price increases are understood by analysing the prices of industrial raw materials (The Economist index) and food prices (FAO) in the international markets (Chart 1,11), which already recorded growth in the central months of 2020. By analyzing with a little more perspective, it can be concluded that inflationary tensions had started at the end of 2019, but that the pandemic halted them. Once a certain normality has been recovered, tensions have again started to break out and this time more intensely.

Finally, we must make an allusion, although the report mentions the possible influence of this inflationary recovery on the growth of income in different sections and in detail in Note 1. The first thing to say is that, in general, there is no direct or immediate relationship between the price increase and the increase of the collection, but in the particular case of 2021 there are also additional reasons to think that the price impact was relatively low. The fact that there is no direct and immediate relationship between prices and collections has to do with the existence of income that is good from transactions occurring in previous years (this is the case, among others, of the differential payments of direct taxes, of annual refunds in the VAT or settlements made by the Administration), either include late price increases (updating pensions due to deviation price increases have materialized in 2022. The most direct relationship between prices and income is given in indirect taxes, particularly VAT. However, as has been seen, in annual terms, the growth in consumer prices was not as high (3.1%, including the upward trend of the incorrect measure of electricity prices) and was concentrated in the second part of the year. Given that the accruals of November, December and fourth quarter, periods with, until then, the higher price increases, they were admitted in the first few months of 2022, the impact of these higher prices was not reflected in the 2021 collection, but in the 2022 collection. To this end, we must add the rate drops in electricity consumption (VAT and Excise Duties) that caused a higher tax loss than the gain that gave rise to prices.