Inflation eats into savings

Eurostat expects the EU-harmonized consumer price index in Greece to jump this month from 1.9% to 3%, showing that retail price hikes are just about starting to grow, becoming obvious in ever more products and services.

The fact that the Hellenic Statistical Authority (ELSTAT) also announced a jump in producer prices in Greece last month confirms that retail price rises are set to grow further and faster. Data showed producer prices increased 5.2% within just one month, and by 19.9% from September 2020; that annual rate is the highest recorded since last March, when the rising course of producer prices started in industry. On a monthly basis there has never been such a spectacular jump.

The domestic market producer price index posted a 17.3% rise on an annual basis and 5.8% growth compared to August 2021. Within one year there has been a 70% increase in the oil products sector. Data further reveal a 35.4% advance in lignite mining, 21% in electricity and natural gas supply, 15% in the production of electrical equipment, 13.5% in the construction of metal products, 10.5% in the production of basic metals, 9.4% in the wood industry, 4% in elastic and plastic materials, 2.6% in the food industry and 2% in the chemicals industry.

The level of growth in production prices, related to the rise in costs for energy and raw materials, means that it is becoming less feasible for companies to absorb it instead of forcing the consumer to pay for it. Therefore the situation developing in the economy is eating into the surplus created in household disposable incomes from the pandemic, while the estimates within and outside of Greece regarding the extension of inflationary pressures for another 12 months are threatening private deposits, which also grew over the lockdowns and continued to expand until recently as a result of the restarting of the economy. Private deposits rose to a decade-high of 173.8 billion in September, growing some €28 billion during the pandemic.