When will food prices finally drop?

While the consumer price index has been falling for the seventh month in a row, confirming forecasts that the redistributive effects of inflation are temporary, food prices remain extremely high, forcing Greek households to “tighten their belts”.

And while technically, due to the negative effect of the benchmark*, the index measuring food inflation will be lower in the coming months, the crucial question of when prices will actually fall remains unanswered.

* Benchmark is a benchmark financial indicator against which you can compare the performance of a company or the return on an investment portfolio.

So far, inflation in the food and non-alcoholic beverages group, although decelerating for three consecutive months, has fallen only 1.2% from the highs of last December and three times the average inflation rate.

According to data released by NielsenIQ CEO Vaios Dimoragas at the Shopper Trends Event 2023, seven out of ten industry and retail leaders say they have decided on a new round of price hikes during the year.

In particular, in a sample of 32 directors of organized trade and industrial companies, it turned out that 68% answered that there will be further price increases this year.

The new price increase will be up to 5%, according to 35% of respondents, and every second responded that the increase will be up to 10%. There is also a small percentage of 6% who answered that the price increase will reach 20%.

Finance Minister Christos Staikouras also publicly confirmed “continued growth in food prices”, which “at least is going at a slightly slower pace.” However, as the sales volume for the four months of 2023 continues to be negative, estimated at between 3% and 5% depending on the product category, and at the same time, the volume of private label products is constantly increasing, some companies that mainly aimed at the domestic end consumer, through small and selective reductions in wholesale price lists or (mainly) through ready-made offers, trying to reduce prices somewhat.

First cheaper products started from the market dairy products (on yoghurts and cheeses from cow’s milk). In addition, more favorable prices due to offers and promotions are observed for some products in categories pasta and flour. Also, the price of chicken. However, this is a drop in the bucket, as these are products that have seen their prices rise significantly over the past two years.

In any case, economic analysts say, expensive stocks of primary and secondary materials must be used up before finished product prices start to fall. This means that we will not see a significant reduction in the prices of basic food products until October next year. And the bitter truth is that prices are unlikely to return to pre-inflationary crisis levels.

“Economic history has proven that prices that have risen will never return to their previous levelfrom which they started. In economics, this is called downward price rigidity,” says Sotiris Anagostopoulos, Secretary General for Trade and Consumption.

According to ELSTAT, eggs and dairy products rose in price in March by 23.1%, i.e. almost 5 times higher than the average inflation. In February, the growth recorded by ELSTAT for the same products was 25.2%, in January 25% and in December 25.6%.

Prices bread and cereals rose in March by 15.6% compared to growth of 16.8% in February, 18.6% in January and 18.7% in December 2022. Prices edible fats and oils rose 17.5% in March, compared to 22.9% in February, 23.1% in January and 21.7% in December 2022. Wherein meat prices in march increased by 19.8% compared to growth of 20% in February, 19.3% in January and 17.8% in December.

Considering that there is a phase difference in food prices – we remember that the growth was slow for the market compared to the increase in energy prices, it will almost certainly take a few more months for consumers to see the first significant price cut.

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