Filenews 5 June 2023
The question often asked by consumers is why do food prices continue to remain high while inflation falls? In food and other basic supermarket items, the picture that emerges from the examination of the analytical data of the Statistical Service, published last week, shows the changes.
From the analysis of the data presented by 'F', some prices are starting to fall compared with last year, others are increasing and some are falling. It is noteworthy that as of May 5, milk, bread, eggs, diapers for children / adults, baby food, feminine hygiene products have 0% VAT, following a government decree that is in force until October 31, 2023. As a result, zero VAT has been incorporated into the May figures, but there are still increases that are smaller than last year.
The price of bread, which has zero VAT, fell by 0.8% in May year-on-year from 15.7% last year. In May 2021 compared to 2020 the increase was only 0,8%. In May on an annual basis, the price increase in fresh low-fat milk is 6.4%, last year it was 4.9% and in 2021 to 1.4%, a product that has zero VAT. Also in the same category are eggs, the price of which rose 4.7% in May year-on-year while last year the increase was 14.1%. Baby food also has zero VAT, prices of which rose 5.6% in May from a rise of 11.2% last year.
What the evidence shows
The first in increases was sugar with an increase of 43.8% in price in one year, while in 2022 compared to 2021 the increase was 28.3% and in 2021 compared to 2020 it was 3.6%. In pasta the price increase was 8.4% year-on-year, last year it was 12.1% and in 2021 it was cheaper by 1.7%. The price of pork increased 6.6% in May on an annual basis, last year the increase was 16.8% while in 2021 compared to 2020 the price had fallen by 4.9%. The price of beef and veal increased by 17.8% in May year-on-year, while last year the rise was 9% and in 2020 to -0.1%. The price for lamb and goat meat increased by 6.6% in one year, last year it was 16.8% and in 2021 it fell by 4.9%. The price of poultry increased by 2.5%, last year it was 20%, and in 2021 the price had fallen by 2.4%. The price of yogurt rose 14.6% year-on-year, last year it was 0.1%, and in 2021 it fell by 2%. The price of cheese is up 18% in one year, last year it was 3.9% and in 2021 it fell by 2.2%. The price of olive oil increased by 14.1% year-on-year, last year the rise was 3.7%, and in 2021 there was a decrease of 1.4%. Increases in May for oils and fats were 18.1%, last year 14.9% and in 2021 at 2.2%. The price of wine rose by 7.6% compared to 1% last year. The price of beer jumped 9.1% in a year, last year the increase was 0.7% and in 2021 it fell by 4.2%. The increase in the price of electricity in May was 8.2% year-on-year, compared to 40.8% last year. The price of oil fell 20.7 percent from a 44.9 percent rise last year and the price of gasoline fell 12.9 percent from a 32.1 percent rise last year.
Global Index
The United Nations' global food price index fell in May to its lowest level in two years, as the decline in vegetable oil, cereal and dairy prices was greater than those for sugar and meat. The Food and Agriculture Organization's (FAO) price index, which tracks food prices around the world, averaged 124.3 points in May compared with a revised 127.7 in the previous month, the FAO said. The price originally given for April was 127.2. This is the lowest reading of this index since April 2021 and means that the index is now 22% below the all-time high recorded in March 2022 following the start of Russia's invasion of Ukraine.
Governments concerned about increases
Persistent food inflation is squeezing low-income households and troubling European policymakers. In Italy, for example, the government held a meeting to discuss soaring pasta prices. At the same time, the most important costs for food production, including fuel, wheat and other agricultural products, have fallen on international markets for most of the past year – raising questions about why food prices for consumers remain so high in Europe. In Europe, governments intervene by imposing price caps on basic foodstuffs. For example, in France, the government is promoting an "anti-inflationary quarter," asking retailers to cut prices on some products by June. French Finance Minister Bruno Le Maire said food producers needed to do more, warning they could face tax penalties if unfair profit margin practices were found to the detriment of consumers.
These efforts may help some consumers, but overall there is little to comfort Europeans. Food prices are unlikely to fall. All that can happen is that the pace of increases slows down later this year.
Given rising labour costs and the possibility of speculation, food prices are unlikely to fall anytime soon. Rising prices could also put pressure on central banks to keep interest rates high, potentially limiting economic growth. In addition to commodity prices, Europe has experienced harsh increases in food supply chain costs. Energy prices soared because the war forced Europe to quickly replace Russian gas with new supplies, driving up the cost of producing, transporting and storing food. Although wholesale energy prices have fallen, retailers warn that there is a long delay — perhaps up to a year — before that decline reaches consumers because energy contracts were made months in advance, likely reflecting higher prices.
Allegations of speculation
Claims are mounting among consumers, unions and some economists that inflation may be kept unreasonably high by companies raising prices (above rising costs) to protect profit margins. The European Central Bank said late last year, corporate profits contributed to domestic inflation as much as wage growth, but did not say which sectors made excessive profits. Economists at Allianz, the German insurance company and asset manager, estimate that 10-20% of food inflation in Europe can be attributed to speculation. However, the lack of detailed data on corporate profits and supply chains has caused divisions among experts.
