Filenews 5 April 2023
A year ago, at this time, in Cyprus and the rest of Europe, the big topic of discussion on a social and political level was the energy crisis, as a result of the Russian invasion of Ukraine, which led to a wave of price increases in products and services.
A year later, Europe has gone from an energy crisis (which has not been definitively overcome) to a cost-of-living crisis, and what worries political leaders the most and hits households the most is the constant rise in food prices. As shown by the data so far, food and core inflation (price index excluding energy and food) will be the major fronts at Cypriot and pan-European level for the coming period, without any de-escalation trends yet.
Tomorrow, Thursday, the Statistical Service of the Republic will announce the consumer price index for March, a few days after the publication of the harmonized index by Eurostat, and detailed data on changes for all food products will be provided.
Inflation in the food index in Cyprus was 12.4% year-on-year in February this year (i.e. a 12.4% price increase compared to February 2022), many times higher than the average inflation rate, which was 6.7%.
The February food index in Cyprus remained at the same levels as in January, which was 12.8%. The first boom in food prices in Cyprus took place in February 2022 (the month of the invasion of Ukraine) with the index going to 108.53 points. Since then, it has been on an upward trend every month.
At its highest point in 2022, the food price index was found in November '22, when it reached 117.11 points, while in February 2023 it increased to 118.58 points.
Worse to other members
However, although households in Cyprus are being brought to their knees by high prices, food increases in the domestic market are smaller than in other European countries. In the European Union as a whole, food increased by 18.4% on average, compared to last year, in January, while in February it was around 15.5%. Hungary emerged as the champion in food prices in January, with a 48% increase in prices (!!), followed by Lithuania with 32% and Slovakia with 28.6%. The same scene continued in February.
According to the International Monetary Fund, food prices hit record levels in 2022 and are expected to remain high in 2023, with the food crisis continuing to hit Europe's households even if the energy crisis fully normalizes. The first serious signs of falling food prices are not expected until autumn, provided of course that there is no new wave of prices following OPEC+'s decision to cut oil production by 1.16 million tonnes. barrels per day to contain or even increase the price per barrel.
Analysts note that the cycle from production to consumption must be closed (i.e. the passage of expensive raw materials to finished products and consumption) so that the de-escalation of prices begins, and this cycle in most cases is one year. The increases in food prices scare the ECB and everything indicates that Christine Lagarde and her colleagues on the board will continue their strict stance on inflation, raising interest rates further until prices fall satisfactorily (the target is 2% inflation).
In a monetary policy statement in mid-March, the ECB said firms needed to contain profits in an effort to bring down inflation.
