A harbinger of a new rise in inflation

By Tasos Dasopoulos

Inflation is now becoming a source of constant concern for the financial staff, which is expected to be announced next week at close to 6%, with the prospect of further growth for the first months of 2022.

The significant reduction of gas prices and consequently of electricity prices in recent days, is considered by market experts to be cyclical. Therefore, the cycle of price increases will continue if the scenarios for a severe winter in Europe and at the same time the supply of limited quantities of fuel from Russia are confirmed.

“Fuel” in the new price increases, which will be reflected in Greece, are the very high price levels for a number of raw materials such as coffee, rice, cereals, vegetable oils, corn, sugar and metals.

The result of international prices is the fact that the producer price index in industry, to record for November an increase of 24.5% for the total market and 22.4% for industrial products consumed in the domestic market. Of course, the largest increase (41.1%) is recorded in energy products, but we also have significant increases in intermediate goods (6.6%) and capital goods (7.2%). The increase in November is a continuation of the increase of the index by 23.5% for October and 19.9% ​​for September. Depending on the type, industrial products are retailed for a period of 1 month (food) to three months for capital products. Therefore, in December we paid part of the November and October price increases.

In the same direction, and the price index of building materials, records an increase of 7.1% for November, compared to increases of 6.3% in October and 5.1% in September. These price increases are also accompanied by a time lag in the construction activity, which is on a recovery trajectory after the last coronavirus crisis, increasing construction costs and, ultimately, real estate prices.

The Ministry of Finance insists that despite the fact that the estimates of international organizations (mainly the ECB) for the time of the de-escalation of prices were reversed in practice, the rise in prices in Greece follows in a long way the appreciations of other EU countries. note the distance that reaches approximately 1 percentage point of the harmonized index of consumer prices in Greece, which reached 4% in November, compared to 4.9% for the Eurozone average.

New support measures

Nevertheless, they acknowledge the social problem posed by the obsession with high prices in households and businesses. In this direction, new measures against the increases in energy products are expected to be announced in the coming days. The measures will cover subsidies for January and February for electricity and gas. Information wants subsidies to households not to have income criteria as it was initially heard, while for businesses a solution is sought to help all regardless of the network from which electricity is supplied. For this reason, YPOIK has requested the opinion of the European Competition Commission.

A somewhat more permanent solution is expected to be provided by the Energy Transition Fund that will operate in the coming months and is expected to play the role of balancer of international prices, with the prices that will be supplied to energy consumers by Greek consumers. However, the Ministry of Finance acknowledges that even if the current period of revaluations enters a phase of de-escalation, the period of transition to a more “green” energy mix, will pass through new periods of revaluations of fossil fuels.