Scotch shower on the economy: Decline in inflation, new food price hikes

By Chrysostomos Tsoufis

On Friday, January 6, Eurostat will give us its… lights on its first estimates for December inflation in the Eurozone. All analyzes speak of its de-escalation and its return to single-digit percentages from 10.1% in November. In Greece, November was closed at 8.8% and estimates speak of a decrease in our country as well.

This de-escalation is explained by 2 main reasons. The first has to do with the de-escalation of energy prices. In the first half of December the price of natural gas moved between €135-€150Mwh, but from the 16th the price is in free fall and this is expected to be reflected in the final size. Oil also moved relatively low, which throughout the month did not exceed $87/barrel.

The second is the so-called basis of comparison, which is made with the corresponding month of last year, and if one looks at the data, one will see that already in November 2021, inflation had started to bite, exceeding 5%.

The positives end somewhere but somewhere here. Energy inflation may be decelerating, but data will show that food inflation persists at alarmingly high levels and the omens are not good.

According to the Union of Consumer Workers of Greece, the contracts signed by the industries with the supermarket chains foresee large increases expected from next week:

Detergents, Shampoo 30%

Sauces, Chocolate 30%

Baby diapers 30%

Cereals, Canned foods 20%

Household cleaners 19%

Cheeses, Toasts 18%

Olive oil 15%

Rice 14%

Jams 12%

Bottled water 11%

Soft drinks 10%

Yogurts 9%

Baby milk 8%

Fruit creams 8%

It is no coincidence that in their latest forecasts for 2022, the ECB and Christine Lagarde paid particular attention to food prices, stressing that they will remain high at least in the first months of 2023.

In this context, the government repeats, with Adonis Georgiadis as the last, that it does not have the fiscal margins to reduce the VAT on food, but also that even if it did, there is no guarantee that it would be passed on to the consumer and not lost in the supply chain but it was done with the reduction of VAT in catering.

The defense against food price increases in the coming months will be set up with the household basket, which has passed its 10th week, and the so-called market pass, which will start from February subsidizing 10% of household purchases. The combination of the 2 meters according to Mr. Georgiadis will give the consumer pre-war prices. From the 1st of April, the support will come with the 3rd increase in the minimum wage and whatever aces are kept up the government’s sleeves in view of the elections.

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