Food prices have become a major problem not only for millions of households, but also for the European Central Bank (ECB) in its particular battle against inflation. While energy becomes cheaper in year-on-year terms, the shopping basket continues to become more expensive in the euro zone and delays a greater general moderation of prices, which may have effects on monetary policy.
In July, according to data released yesterday by Eurostat, food prices rose by 11.6% in the euro zone compared to last year, to become by far the category that most strains the pockets of Europeans.
The data released yesterday by the European Statistical Center would have been better if it were not for this circumstance. Inflation fell two tenths in July compared to the previous month and stood at 5.5%, in line with what was anticipated. In underlying terms, without including energy and fresh food, the progression was 6.6%, two tenths less.
The drop would have been greater and would have brought the ECB a little closer to its goal of putting inflation at 2% if it weren't for food. Its persistent rises reduce the effect of the 6.1% year-on-year reduction in energy and aggravate the 5.6% increase in the cost of services. In July compared to June, practically all the headings moderated, but food did not, with an increase of 0.4%.
Yesterday's data also show a trend that has been entrenched for more than a year throughout the European Union. The war in Ukraine, the drought and the increase in costs have plunged the continent into a spiral of especially pressing price increases in products such as sugar, oils and milk.
Spain is no exception to this drift and, despite being the third country in the European Union with the lowest inflation, it is close to the average in terms of food. They rose 10.8%, more than in nine other countries, although not as much as those registering the most worrying increases, which are Hungary, with 21%, and Poland, with 16.7%, both outside the zone euro.
On September 14, the ECB meets to decide whether to raise rates beyond 4.25% or whether to maintain them. The new strategy, as explained by its president, Christine Lagarde, consists of observing each piece of data and acting accordingly, with an eye on the statistics of growth, demand and, above all, inflation.
Oanda analysts see "abundant upside risks" related to inflation, including "further shocks to energy or food prices." In Nomura they have been warning for some time that food would lead to prolonged inflation and in DWS they indicate that, having indications of a slight decrease in food prices, it is less than expected. "The increase is still too strong and places a burden on family budgets," they add.
In Spain, the rise is being especially pronounced in sugar, 44% year-on-year in July, and in olive oil, which has increased in price by 39% in the year and already costs seven euros per liter. They also cost more milk, which rose 17%, and potatoes, 16%. Cereals are the only product that rises less than general inflation, 1.2%.
The main measure implemented by the Government to alleviate the increases has been the abolition of VAT on basic foodstuffs and a reduction from 15% to 10% on several of them, including pasta or oil. The question is whether the supermarkets transfer this drop to the final consumer, although the CNMC has just published a report in which it ensures that there is no evidence to the contrary.
Another measure is the check of 200 euros for families with incomes of less than 27,000 euros, insufficient in the opinion of consumer associations. The OCU is one of those that are demanding that the Government raise this amount in an "urgent and substantial" manner.
