Sharp rise in food prices continues
Food prices reached a new high in November amid a worrying trend which has seen a spike in the cost of living since the turn of last year (2021). These concerns have been augmented further in the new year as local dairy products company Benna announced steep increases of up to 57% in its range of essential products such as yoghurts, fresh cream and milk.
Data published by the National Statistics Office shows that the annual rate of inflation as measured by the Retail Price Index (made up of a basket of goods) reached 2.38% in November, when compared to just 0.19% in February. Of particular concern is the fact that the largest increase was registered in the food index with a rise of 4.5% when compared to November 2020.
This trend is significant as expenditure on food eats up a large chunk of available budget of low-income families and those known as the working poor – the term used for persons with a full-time job who nonetheless struggle to make ends meet.
The NSO data tallies with research carried out by the Central Bank whereby it transpired that over three quarters of business in the wholesale and retail sector increased their selling prices between July and September last year. Increases in the cost of raw materials, freight, transportation and shortages in producer countries were the reasons cited by businesses.
The RPI is made up of 10 main indicators which gauge movements in the cost of living. Apart from food it also comprises the cost of essential items like water, electricity, gas and fuels, clothing and footwear, transport and communications, housing, recreation and culture. These indicators are further subdivided in order to get a wide snapshot of price fluctuations.
An analysis of the food index reveals that in the last year food items excluding restaurant services and take aways rose by 4.83%. Moreover, there has been a monthly rise of 1.73% between October and November. Though the NSO only mentioned an increase in the price of vegetables, it is an open secret that essential items like bread and other groceries have also gone up in price. As a matter of fact, there has been a steady rise in the number of people relying on the support of foodbanks. The latest upward revision, the second since 2019, was announced by Benna at the turn of the year citing higher costs in animal fodder. In certain cases the prices increased exorbitantly such as the 250ml fresh cream which rose from 70c to €1.10.
The second highest contributor to the rise in the cost of living last November, was from the “other goods and services index” which rose by 3.08% annually. This was mainly as a result in the rise of veterinary services, pet food, insurances and financial services. Other notable annual upward movements were registered in housing, recreation and culture.
On the other hand, there were slight decreases in transport and communication and in the group comprising household equipment and maintenance costs. However, these were not high enough to offset the overall rate of inflation.
Apart from a monthly basis, the NSO also measures the cost of living through what is known as the 12-month moving average. This method overcomes any seasonal fluctuation by comparing the average of the latest 12 months with the average of the previous 12 months. Consequently, the result gives a better overall picture of the situation. For this reason, this methodology is used for the computation in the cost of living allowance (COLA). However, there have been calls to revise the COLA mechanism in order to monitor the cost of living with a more up-to-date basket of essential items which reflect current needs. In the 2022 Budget the COLA was of €1.75 a week.