Grains, fuel driving inflation
Fears that July’s spike in prices is set to continue are heightened by likely shortages
Expectations of a de-escalation in inflation, especially food prices, which concern most people, are clearly diminishing, since production costs, but also profiteering, are set to add another round of price hikes.
Last Monday, Eurostat published inflation figures that showed a reversal of a nine-month decline for Greece. The Harmonized Index of Consumer Prices rose to 3.4% year-on-year in July from 2.8% in June. In the 20-member eurozone, inflation dropped to 5.3% from 5.5% in June.
Fueling inflation are grains, olive oil and fuel, with the latter having an impact on several products and services. Officials also say that more than just production costs are involved, blaming profiteering. The most recent statement came from Bank of Greece Governor Yannis Stournaras talking to TV network CGTN, saying that, for the first time in many years, price increases are far steeper than wage increases. Also, prices are rising at a higher rate than costs, which means that profit margins have risen, the central banker added.
The independent Hellenic Statistics Authority (ELSTAT) will announce its own national consumer price index data on Tuesday, and it will be interesting to know if the inflation trend reversal pointed at by Eurostat will be confirmed and whether food prices remain the main problem. In June, ELSTAT data showed food prices had risen 12.2% year-on-year and 2.1% from May 2023. Eurostat figures showed month-on-month food prices up 3.3% in Greece, the highest among the 27 EU members.
At present, the most worrisome developments concern price hikes in grains, olive oil and fuel. At the end of July, international soft wheat prices were at their highest level since February, as a result of Russia’s quitting the Ukraine grain deal. After a Russian attack on a grain warehouse on the Danube, forward contracts at Chicago’s Merchandise Mart rose 4% and remain vulnerable to any adverse geopolitical developments. A lot will depend on this year’s harvest in the northern hemisphere, coming up in the next few weeks.
In addition, high temperatures in Canada are expected to affect the September harvest of hard wheat from which pasta is made.
