Inflation is set to endure, ECB warns
The European Central Bank’s latest Economic Bulletin, published Thursday, begins thus: “Inflation continues to decline but is still expected to remain too high for too long.” This is a worrying statement, including for Greece, whose inflation may be lower than the eurozone average, but whose annual pace jumped from 1.8% in June to 2.5% in July, ending nine successive months of decline.
In Greece, wage increases lag those in goods, especially foods, but the problem is deeper: it has to do with how markets and production are set, making Greece very vulnerable to outside factors. In February 2022, for example, when the war in Ukraine started, food prices were up 7.5% year-on-year in Greece, compared to 4.8% in the eurozone. This lasted until August 2022; the pace of inflation has evened since then, but there are signs that food prices are again growing more steeply in Greece. Eurostat data show that, among 21 food categories, prices in 10 of them were rising more steeply in Greece than the eurozone as a whole. The greatest divergence is seen in meats, with beef and pork prices rising at double the rate, and even mutton and goat, where Greece is self-sufficient, becoming more expensive.
Prices have been rising even as those of raw materials and energy costs have declined. There are two reasons for that: products made when raw materials are more expensive are still making their way to the consumers; also, companies that kept prices relatively steady last year for fear of losing their market share, now feel free to mark up prices.
Which takes us to the fact that consumption has not decreased as much as inflation would warrant and, therefore, there is no downward pressure on prices.
