Inflation in Greece: The “nightmare” with food prices

Food prices continue to rally at high rates, causing great concern to consumers who “see” their incomes decrease. As the data released yesterday by the Hellenic Statistical Authority-ELSTAT showed, food inflation is more than three times higher than the increase in the general consumer price index. The situation has become unbearable in recent months, as the index in the group “food and non-alcoholic beverages” from 13.5% in September reached 14.8% in October 2022, touched 15% in November, and peaked at 15.5% in December, while in January it was at 15.4%. In February it “fell” a bit to 14.8% to be end up in March at 14.3%. Of course, it is worth noting that this imperceptible de-escalation does not mean anything to consumers, as these are large price increases, which come to be added to the previous ones.

Price increases

Based on the ELSTAT data, eggs and dairy products increased by 23.1% in March, i.e. 5 times above the average inflation. In February the increase registered by ELSTAT for the same products was 25.2%, in January 25% and in December 25.6%.

Bread and cereals, whose prices shot up 15.6% in March, compared to increases of 16.8% in February, 18.6% in January and 18.7% in December 2022.

Edible fats and oils showed a March price increase of 17.5%, compared to an increase of 22.9% in February, 23.1% in January and 21.7% in December 2022.

At the same time, meat prices increased by 19.8% in March compared to an increase of 20% in February, 19.3% in January and 17.8% in December.

How consumers are affected

The most important issue is the backlash that citizens face due to price increases. It is typical that the survey of the Union of Consumer Workers of Greece of the General Workers’ Confederation of Greece-GSEE published at the end of March shows that consumers reduced the purchase of food and other basic necessities (55.6% and 65.10% respectively), cutting out other basic needs , such as travel, recreation (6 out of 10 are unable to take even one week of vacation a year, while 3 out of 10 say they haven’t taken a vacation in years!) but also heating (86.8% say they have limited it to a significant extent). Regarding the “basket”, more than 70% declare that it does not contribute at all to the reduction of prices, while 80% declare that they do not make use of it.

Consumers have changed habits, as studies show, and are buying fewer products, while being pushed to choose cheaper solutions. They turn to the “refuge” of private label products, the share of which set a new record during the last 12 months with 17.7%, that is, as much as it was at the time of the deep economic crisis, in 2012. It is noted that their share increased by 21.3%.

Drop in the standard of living

The result of high prices is the deterioration of living standards. For example, in September 2022 the poorest households would have to increase their consumption to 171% of their disposable income in order to maintain the standard of living they had in 2021. According to the study published as part of the Eteron-Institute for Research and Social Change for Economic Justice, 1/4 of this extra consumption was subsidized by the government, meaning that, taking into account countervailing measures, this income group was actually burdened by the price spike by 13 %.

Forecast

It is worth noting that last year the national index closed at 9.6% and the harmonized index at 9.3%, a percentage formed by 4.47 percentage points from increases in energy, by 2.30 points from increases in food items and by 2.53 points from increases in the two main components of core inflation, namely services and non-energy industrial goods. Now, the tone for inflation and rising prices is expected to be shaped by the prices of food items, services and non-energy industrial goods, with the government’s economic staff estimating that price increases will continue in the coming months, as stated publicly by the Finance Minister Christos Staikouras.