The Spanish consumer goods industry association AECOC issued a warning at its conference, stating that energy price fluctuations caused by geopolitical tensions in the Strait of Hormuz and other areas are continuing to impact domestic inflation, consumer spending, and corporate profits along the production and logistics chain, with signs of cooling in private consumption already emerging. The association covers 35,000 production and distribution companies nationwide and is the most important industry representative for the Spanish consumer sector. AECOC President Ignacio González pointed out that energy volatility caused by Middle East geopolitical conflicts is the most significant external risk source for the consumer goods supply chain. While surface data for the consumer sector appears acceptable, its underlying resilience is weak, and external energy shocks could easily be transmitted to end-consumer levels, requiring vigilance against the risk of further deterioration.

Inflation has not subsided: energy and housing prices continue to erode residents' purchasing power.

Although current inflation in Spain has significantly declined from its peak during the 2022 Russia-Ukraine crisis, with the overall CPI at 4.9% year-on-year in September and food inflation falling to 2.7%, González emphasized that low inflation does not equate to falling prices. The cumulative effects of inflation over the years have continued to erode household purchasing power. Energy is the starting point of this pressure chain: Spanish energy prices inherently involve high taxes, and rising external energy prices increase costs across the entire supply chain, from transportation and processing to warehousing, ultimately passing on to downstream essential goods such as food. Since 2021, food prices in Spain have risen by 29% cumulatively. This continuous increase in costs is like being caught in a downpour, constantly consuming residents' disposable income. Coupled with high housing costs and the fact that personal income tax has not been adjusted to keep pace with inflation, resulting in implicit tax increases, household spending is squeezed by rigid expenditures, weakening consumer spending. González stated, "We are facing a situation of inflation on top of inflation. The rate of price increases has only slowed; previous price increases will not fall back. Housing costs and unadjusted personal income taxes continue to erode residents' purchasing power, creating a clear disconnect between macroeconomic data and residents' actual experiences." Data from Circana Consulting and the Spanish National Statistics Institute (INE) confirms the weakening consumption signal. The past month was the worst month for consumption this year, with the retail index weakening year-on-year for three consecutive months. Institutions predict that the annual consumption growth rate for 2026 will be only 3.5%, and the outlook for domestic demand is not optimistic.

Businesses are under passive pressure: they are trying to delay price increases by compressing gross margins, but their buffer is limited.

Faced with rising costs, consumer goods companies are currently choosing to absorb most of the price increases themselves, proactively compressing profit margins and implementing cost-cutting measures to avoid passing all costs on to end consumers. This is the core reason why food inflation is lower than the overall CPI. According to González, the current lower food inflation compared to the overall CPI is essentially due to companies actively compressing profits and bearing costs, acting as a "buffer" against inflation. However, this model has its limits. The longer the situation in the Strait of Hormuz drags on, the weaker companies' ability to absorb energy costs will become, and the pressure of forced price increases will continue to accumulate. The association clearly points out that there is a hard limit to companies' profit buffer space, and the probability of subsequent cost increases being passed on to end-user prices will significantly increase. González believes that Spain's tax revenue has increased by 50% compared to seven years ago, and there is room for tax cuts at the fiscal level. Policy adjustments can alleviate the pressure on both the supply chain and residents. In addition, the association also calls for the swift finalization of the national budget, increased investment in digitalization, optimization of employment and immigration policies, and improvement of productivity weaknesses to provide companies with stable business expectations.

In conclusion, the negative cycle risk of energy shocks warrants vigilance.

The transmission chain of energy geopolitical shocks often exhibits a lag; it doesn't immediately push up inflation figures, but rather first squeezes the profit margins of midstream distributors and manufacturers. When companies' ability to withstand price increases is exhausted, cost pressures translate into rising commodity prices in bulk, further pushing up sticky inflation and suppressing consumer spending. González summarizes that external energy shocks are the underlying variable in the entire consumer goods chain; the transmission sequence is: increased energy costs → squeezed corporate profits → delayed transmission of inflation to end consumers; once corporate buffers are exhausted, a vicious cycle of inflation, purchasing power, and consumer demand forms. For European economies highly dependent on external energy, this external disturbance creates a negative cycle: energy premiums increase supply chain costs and compress corporate profits, forcing companies to repeatedly weigh market share against profit maximization; once price increases spread, inflation rebounds, household purchasing power is damaged, and consumer demand weakens, which in turn constrains corporate revenue and capital expenditure. The AECOC's warning essentially reminds the market not to be complacent about short-term declines in inflation data; external energy risks will remain a persistent tail risk to inflation, consumption, and corporate profitability in Spain.