Spanish businesses worry retail sector pay hikes could fuel inflation

By Inti Landauro

MADRID (Reuters) - Global fast fashion giant Inditex and a few other Spanish retailers have granted their workers significant pay hikes, prompting calls for caution from the wider business sector which fears blanket moves could further stoke inflation.

Zara owner Inditex's announcement on Thursday of a whopping 20% pay rise for all its shop workers in Spain followed two blanket wage raises of 6.5% and 5.7% in 2022 and 2023 at the country's largest supermarket chain Mercadona, and a general 12% increase at its smaller rival Dia.

Meanwhile, labour unions are discussing two-digit raises with other supermarkets and department stores.

The country's largest business association CEOE on Friday welcomed the pay agreements in the retail sector, where wages are notoriously lower than Spain's average, but warned that "in the current situation, not all companies or all industries are in the same position".

"We have called for caution to avoid second-round effects on inflation when blanket salary increases are debated," it said in a statement.

Government officials have not replied to Reuters requests for comment about the wage increases.

Higher wages tend to boost demand for consumer goods and often lead to increased prices.

The CEOE has recently opposed the leftist coalition government's decision to raise the country's minimum wage by 8%, which traditionally serves as guidance for collective bargaining between unions and companies.

Rampant inflation that hit consecutive three-decade highs in 2021 and 2022, averaging 8.4% last year, has exacerbated discontent among workers in the retail industry leading to strikes and protests at Inditex in the past few months - a first for the group.

Although Spain's headline inflation has fallen to 5.8% in January year-on-year from a July peak above 10%, core inflation, excluding volatile energy and food prices, has kept on rising.

Official data show retail industry wages at an annual average of 16,604 euros ($17,745), well below the country's 24,249-euro average.

According to data from Spain's tax agency, salaries of retail workers in companies with annual revenue of at least 6 million euros rose by 6.3% on average in 2022 from 2021.

($1 = 0.9357 euros)

(Reporting by Inti Landauro, Belen Carreño and Corina Pons, editing by Andrei Khalip and Emelia Sithole-Matarise)