Inflation ‘slows down’, but prices soar – The trends for August and September

By Tasos Dasopoulos

Signs of stabilization, after 11 months of rapid rise, shows inflation for July with estimates wanting to move in the region of 12% for the second month after June, without of course the wave of accuracy in fuel and food still showing signs of a visible retreat.

As competent sources of the Ministry of Finance explain, the containment of inflation last month is more technical than essential, since in July 2021 inflation had started to increase, reaching 1.4%. Thus, the result for this year’s July will be formed on the basis of the same month of the previous year.

Along with the technical reduction, the positives of July include the fact that since the middle of last month the oil price has fallen by about 12%, which also affected the price of gasoline, which has gradually declined from the 2.5 that was at the beginning July to 2.1 euros per liter at the end of the month. On the contrary, the price of natural gas (and therefore also the price of electricity) continued to rise last month.

Natural gas prices in the two months of June-July rose more than 115% due to concern about the EU’s energy sufficiency, reaching 199 euros per thermal megawatt hour in early August, from 90 euros which was the price in early June. The wholesale prices for electricity, which follows step by step the price of natural gas, have today reached 372 euros per megawatt hour, from 220 euros at the beginning of June.

The food

On the second hot front, that of food, grain prices after the agreement to restart exports between Russia and Ukraine, prices have fallen by 30%, but only in commodity market futures. Given the time delay that exists in the transfer of price reductions from wholesale to retail, these reductions are expected to be passed on to the Greek market around the end of September and the beginning of October. This, given that there are still stocks in Greek warehouses, which have been bought at high prices.

A new problem highlighted by the data collected by the co-competent Ministries of Finance and Development & Investments is the continuous price appreciation of dairy products, mainly due to the availability of raw milk. Behind the phenomenon is the tendency of breeders to slaughter and sell their animals for meat, as feed prices, at least until recently, have been sky high, making it unprofitable to keep herds solely for milk production.

As for the rest of the food, the prices also show moderate increases of 3 to 6% in all fresh products such as meat, fish, eggs, vegetables and fruit and smaller in the order of 2-3 % in processed foods of daily consumption.

Anxiety about September

Early forecasts for August are for inflation to stabilize further as oil continues to bear down. As far as natural gas is concerned, barring an exceptional prospect, the price is estimated to have found its “ceiling”, since the markets have incorporated the bad scenario of a complete stoppage of Russian natural gas supply to Europe.

The concern is found in the month of September, when everyone will have returned from the summer holidays and will be faced with the new, largely extraordinary obligations of the autumn. In addition, from next month, the expectations of the markets for the operation of the EU energy saving program in practice will be seen.

Then Moscow is expected to take the next step of energy blackmail towards the West, negatively affecting the course of natural gas and electricity prices.