By Tasos Dasopoulos
The inflation trend will be upward in the coming months, with estimates that it will reach 4.5-5% at the end of the year, in terms of the Harmonized Index of Consumer Prices, as the consistently high increases in food will gradually be burdened by the energy prices.
This will happen because the high energy price base of 2022 will be removed. As is known, after the peak reached in September 2022, energy prices, with natural gas reaching a record price of 332 euros per thermal megawatt hour and crude oil at $120 a barrel, in October prices fell significantly. In fact, a year earlier they reached approximately the prices they had until the end of September 2023. After the flare-up we had in the Middle East, prices increased by 15% due to increased uncertainty. This increase will also be seen in retail prices in the next period. Energy prices, due to Greece’s still high dependence on imports, will create a “precision spiral” that will spread to all the products and services of the inflation “basket”. The first sample of this transmission came recently from electricity. The prices given by the producers for November were increased by 10% up to 40%. This while at the end of the year, the period for which the famous readjustment clause for electricity tariffs was suspended also comes to an end.
Continued rise in food as well
Regarding the food category, Eurostat in its estimate yesterday shows that in Greece prices fell in October, to 9.6% from 10.8% in September. In addition to the problems that continue to exist due to the war in Ukraine, prices continue to rise at an almost double-digit rate due to the climate crisis that has destroyed part of the production and the increasingly expensive imports of meat and raw materials. Unfortunately, the situation foreshadows a continuation of the price increases, with only an embankment of the measures taken recently by the Ministry of Development, to slow down the continuous increases.
New support package
All this obliges the Government to proceed with the planning and implementation of another package of support measures, aimed at the economically vulnerable, who are most affected by the crisis. This package of measures will probably be integrated into the final draft of the budget.
As for the decline in structural inflation to 4% for the previous month from 5.4% in September, it gives a signal of containment of inflation due to the restriction of consumption. As you know, core inflation refers to the basket of inflation if you remove unprocessed food and fuel. The decline of the structural, in an environment of intense inflationary pressures, shows that consumers having to deal with the large increases in food and fuel, do not consume all other goods and services at the same rates, as a result of which the increases recede.