However, the declining annual price increase is not yet due to the decline in the price index this year but rather to the monthly increase in last year's price reference base. After all, at the beginning of last year, inflation was just getting into full swing, with monthly jumps of around 2%.
The relatively high monthly inflation is due to the increase in electricity prices for the population since the beginning of the year, the rise in the price of some heating fuels, the rise in the price of alcoholic beverages, and the significant rise in the price of vegetables, as recorded by the statisticians.
In Europe, vegetable price hikes and deficits. Already in the autumn, vegetable growers in the major European countries were forecasting possible deficits due to the impact of the energy crisis on their businesses. The cold season has made the greenhouse business unprofitable, with fertiliser prices hitting record highs and energy costs rising significantly. Vegetables are thus becoming more expensive, both because of bloated costs and because of the lower supply of greenhouse-grown produce.
International commodity price indices are back to pre-war levels. Rising interest rates, a more sluggish economic pulse and a cloudy outlook in developed countries have eased the pandemic-induced tensions in supply chains. Favourable weather and reduced energy carrier consumption have helped avoid the gloomiest energy scenario this winter. On the contrary, we are witnessing the return of gas and electricity price curves to pre-war levels.
Similar reasons have pushed up the price of industrial metals. The opening up of China has not been sudden, and the waning appetite of export markets in the West has also constrained the recovery in production. Since the record highs set last spring, the S&P GSCI Industrial Metals Price Index is down 28%, with double-digit declines in all industrial metals: tin down 51%, aluminium down 38%, zinc and copper down 23% and lead and nickel down 12% and 14% respectively.
Prices of food raw materials have been falling from record highs for some time, but this is not reaching final consumers. The Food Price Index published by the Food and Agriculture Organisation of the United Nations has fallen for the eleventh consecutive month and is 8% lower than a year ago. The price index for oilseeds has shrunk by a third over the year and is back to the level seen in 2020, the index for dairy products has fallen by 7%, and cereal prices have returned to the level of the beginning of last year, after a spike in the second quarter of last year.
Trends in commodity markets are still not reaching final consumers, for whom food prices are not falling. Supply chains are accumulating expensive raw materials and intermediate goods. It will therefore take time before expensive raw materials, consumables or intermediate goods used in warehouses and production are replaced by cheaper ones.
Population consumption demand is changing, but very gradually. Rising energy prices in the cold season and the high cost of almost all goods and services are forcing people to change their behaviour. In December and January, retail sales of foodstuffs (excluding the impact of prices) fell by 10.6% and 5.8%, respectively, compared to the same month a year ago. Food prices have risen by as much as a third, forcing people to change their habits, switch from the usual brands to cheaper alternatives, hunt for promotions, and give up some unnecessary items. This behaviour sends a strong signal to the market, to which food retailers will eventually have to react.
Rising labour costs will fuel inflation. Although commodity inflation is still sticky, it is only a matter of time before it stabilises, as there are fewer and fewer objective circumstances to support price rises. Meanwhile, services inflation will continue to be fuelled by wage growth. It is programmed by decisions to raise public sector wages and increase the monthly minimum wage (MMA). As the MMA can only be paid for unskilled work, its rise is broad-based and affects the entire income vertical.
