Why is the economy doing well… but people feel it’s doing badly?
In recent months, a paradox has taken hold that’s hard to ignore. Macroeconomic data points to growth, job creation, and more contained inflation, yet the economic perception of a significant part of the population remains negative. Many people feel their economic situation isn’t improving: money stretches less, saving feels harder, and the future looks uncertain. This gap between statistics and lived experience reflects concrete economic factors that help explain why the economy can be doing well while people feel it’s doing badly.
Positive macro data, uneven impact
From an aggregate perspective, the economy has behaved relatively solidly. Economic growth has been above the European average and employment has reached high levels, while headline inflation has moderated after the sharp spikes of previous years. However, this hasn’t automatically translated into a clear improvement in well-being. Wages have risen since 2019—around 20%, according to Spain’s Labour Cost Survey (INE)—but they started from relatively low levels compared with other European countries and, in many cases, that progress has been absorbed by the rising cost of living.
Still, growth doesn’t show up in daily life because it isn’t distributed evenly. GDP measures how much a country produces, not how that growth is shared or how it translates into real income per person. Added to this is the cumulative effect of inflation. Even if inflation is now more contained, prices have not returned to previous levels. The sustained rise in the cost of basic goods and services has eroded purchasing power: many households pay more for the same things than they did a few years ago, even if their wages have increased slightly.
Housing, essential prices, and the loss of purchasing power
If there is one factor that best explains the disconnect between data and perception, it’s housing. The sharp rise in rental and purchase prices has absorbed a growing share of incomes, especially in urban areas. When housing, utilities, and food account for most of a household’s financial effort, any wage improvement is quickly neutralized.
This pressure on essential expenses explains the feeling of lost purchasing power despite growth. It’s not only about how much you earn, but how much remains after covering the basics. In that context, the message that “the economy is doing well” clashes with everyday reality: tighter budgets and less ability to save.
Moreover, the impact is not the same for everyone. Young people, families with recent rental contracts, or households with less financial slack feel this gap more intensely, reinforcing a negative economic perception even during expansion.
The real economy, expectations, and consumer confidence
Another key is the difference between the real economy and the financial economy. Macro indicators and markets often react earlier and faster than wages or living conditions. Growth can exist without its effects reaching household finances immediately.
On top of that comes the role of expectations. Consumer confidence remains fragile after years of back-to-back crises: the pandemic, high inflation, and geopolitical uncertainty. Recent economic memory weighs more than current data. People compare their situation to a few years ago—and to what they expect from the future; if that comparison is negative, perception will be negative too.
Part of this gap may be cyclical, driven by the delay with which wages and real incomes respond to growth. But there are also more structural elements—such as difficult access to housing or reduced room for savings—that make the sense of stagnation persist even when the economy advances.
Purchasing power rather than GDP
The economy can grow and, at the same time, generate discomfort. That isn’t a contradiction—it’s a consequence of how growth is measured and how it’s lived. Macro data is necessary to understand a country’s direction, but it isn’t enough to explain households’ day-to-day experience.
Understanding this gap helps explain why economic perception remains negative despite good indicators. And it’s a reminder that the true thermometer of progress isn’t only GDP, but purchasing power, stability, and the real ability to plan the future with confidence—without giving up.
