Inflation figures frighten the Ministry of Finance

By Tasos Dasopoulos

The “transmission” of increases from energy products to more and more food but also the general uncertainty about the time of falling prices, will keep the Ministry of Finance on high alert at least until the end of the first half of the year.

In its analysis, yesterday’s ELSTAT bulletin shows that the risk from fuel has not yet passed, despite some signs of de-escalation that we had in the last 10 days. This, given that of the overall increase of 5.1% in the General Consumer Price Index in December, 3.5% is due to price increases in energy products.

The financial staff has begun to worry about a steady upward trend in inflation, at least for the first half of the year, but also for price increases, which will now affect almost the entire “housewife basket”. This has already triggered political tension before the phenomenon and threatens to cause social unrest if it is extended beyond the quarter.

The first indication that things are moving in this direction was shown in yesterday’s bulletin by ELSTAT. Specifically, while we enter winter late, before the weather deteriorates we have increases in unprocessed food. In particular, prices for fresh vegetables and fruits increased by 5.5% (above the General Index).

Large increases are also recorded in meat. Specifically, we have a very large increase in lambs (19.7%), an increase above the General index in fish by 6.7%, in poultry (6.6%), while in meat preparations 4.2% and only in beef price reduction. The exception is pork by 1.9%. We also had large increases in olive oil (17%) and other edible oils (17.1%), in the prices of cheese (5.5%) and bread (4.9%).

Also, ELSTAT records for December an increase in prices for cars, new and used. This is a sign that the problems with the supply chain and the production of semiconductors have not yet been solved. In addition, ELSTAT records an increase in glassware and tableware for the home by 7.4%, and 3% in clothing and footwear prices. In the services sector, there was an increase of 5.7% in prices for domestic services, 19.6% for passenger transport by air and 7.3% in the prices of hotels, motels and inns. The latest increases have not been made in recent months

The financial staff now observes what the market executives have clearly stated for a long time. As long as the warehouses are full of goods that were bought cheaper, the burden will be reduced on retail prices. But when they empty and refill with products that have been bought more expensive, then the increases will begin to be borne by consumers.

The duration of the pressures is now unknown

In addition to the spread of price increases in the products of the “housewife basket”, the biggest fear for the Ministry of Finance is the duration of the price increases. Despite the partial decline of energy products lately, everyone considers it a scrap before a new storm breaks out.

The European Central Bank, which has been a guide for the Eurozone as a whole but also for Greece in terms of forecasting the duration of revaluations, seems to be constantly revising its forecasts but is firm in its position that until 2023 inflation will have returned below 2%.

In essence, the ECB is no longer confident about when and how international prices will stabilize before they begin to de-escalate.