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This winter’s drought has highlighted one of the most important challenges facing Spain’s agrifood sector: improving how water resources are used given the prospect of their availability becoming more limited.

The food price rally has begun to slow, but the cumulative increase since 2019 is significant and expenditure on food now represents a higher percentage of Spanish households’ consumption. The decline in agricultural and energy commodity prices in the international markets relative to their peaks reached in 2022 should help to contain agricultural production costs and thus to further ease the inflationary pressures on food over the coming quarters.

The agrifood sector continues to suffer from the sharp rise in production costs and the impact of the drought. However, the decline in agricultural commodity and energy prices on international markets from the peaks reached in 2022 should help contain agricultural production costs and thereby moderate inflationary pressures on food. Nevertheless, the severe drought that has been affecting the Iberian Peninsula since last year has reduced the yields of a large number of crops such as cereals and fruits, impacting both prices (up) and the volume of exports (down). All in all, in value terms agrifood exports continued to grow at a good rate in S1 2023 due to the rise in prices, reflecting the high competitiveness of Spain’s agrifood sector despite the adverse conditions.

In yesterday's session investors traded cautiously as they digested political developments. On the one hand, tensions between the US and China rose as the White House gave China 72 hours to close its consulate in Houston amid accusations of spying. China has said it intends to retaliate.

Tourism expenditure from the United States in Spain has shown a marked slowdown since late 2024. This deceleration partly reflects the normalization of tourism growth after the pandemic, as well as macroeconomic factors such as the appreciation of the euro against the dollar and deteriorating growth prospects for the US economy. However, since these factors operate with a time lag, it is likely that the current slowdown also stems from rising uncertainty surrounding US economic and trade policies impacting Americans' propensity to travel to Spain. Considering that in 2024, US tourists accounted for 4.6% of total arrivals and 7.1% of international tourist spending in Spain, this slowdown could potentially subtract up to 1 percentage point from growth of tourism GDP in 2025. Certain regions, particularly non-coastal urban areas, could experience greater impacts due to their higher dependency on American tourist expenditure. Thus far, the sharpest slowdown has been observed in rural areas, where the share of American tourists is comparatively smaller.