Eurobank: Which products have the highest price increases?
The maintenance of the energy crisis for a longer period than expected may have an upward effect on the expectations of the economic actors, the bank emphasizes.
According to the recent announcement of ELSTAT , the annual inflation in Greece based on the HICP, increased to 4.0% in November 2021 (4.9% in the Eurozone) from 2.8% in October 2021.
According to Eurobank in its regular analysis of the economy, due to the strongly negative inflation in the corresponding month of the previous year (-2.1%), the HICP in November 2021 compared to November 2019 was increased by 1.8%, that is, at a rate that is relatively mild over a period of 2 years.
The base effect is obvious and will continue to exist in the short term. The forces that triggered the pandemic and led to an annual fall in prices from April 2020 to May 2021 (reduction in demand, energy prices and specific VAT rates) were reversed in 2021 (these VAT rates remain unchanged), resulting in the annual rise in prices from June 2021.
Undoubtedly, the current upward trend in inflation in Greece, a development common to most Eurozone countries, stems largely from rising prices for imported goods, mainly in the energy sector.
How the price level in the individual groups of goods and services moved in November 2021
Housing price indices (including consumption of water, electricity, gas and other fuels), transport and food and non-alcoholic beverages, recorded the highest annual increases, at rates of 18.1%, 5.8% and 4.0% respectively.
In contrast, the price indices of communications, other goods and services, leisure and cultural activities and health, decreased on an annual basis by 2.6%, 0.4%, 0.1% and 0.1% respectively. Compared to November 2019, the housing price index showed the largest increase with 12.7%, followed by that of food and non-alcoholic beverages with 5.6%.
Finally, in transport, the strong annual rise of the price index in November 2021, did not exceed last year's correspondingly strong fall, with the result that this price index is 1.1% lower than pre-pandemic levels.
Maintaining the energy crisis for longer than expected, as well as unbalanced factors on the pandemic front with negative effects on supply, may have a bullish effect on the expectations of economic agents about the level of inflation.
However, one factor that will continue to have an inhibitory effect on the strengthening of inflation in the Greek economy, at least in the short run, is the positive discrepancy between the current and the natural unemployment rate. According to today's publication of ELSTAT, the average unemployment rate in the period January-October 2021 was 15.2% (13.3% in October 2021), with the natural unemployment rate - below which inflation is strengthened in theory - to be estimated by the European Commission at 12.5%. This percentage is much higher than the corresponding one in the Eurozone (7.3% and 6.6% in the EU-27).
The debt crisis, with the large number of the long-term unemployed, the devaluation of the skills of the productive factor of labor and the structural changes at the sectoral level (eg great contraction of the construction sector), explain to some extent the above result.
The role of structural reforms is crucial for reducing the natural rate of unemployment in Greece, so that the projected recovery of demand in the coming years does not trigger strong inflationary pressures and loss of competitiveness.
Concluding our report, it is worth noting that until the 3rd quarter of 2021, the competitiveness of the Greek economy in relation to its partners in the Eurozone, in terms of real weighted exchange rates (FSA) based on the consumer price index, remained on an upward trajectory.
Specifically, the PPSI decreased on an annual basis by 1.6%, reflecting the higher level of inflation in the Eurozone compared to Greece, the bank concludes.
