Biggest deflation in half a century

The Greek consumer price index (CPI) posted its biggest decline, by 2 percent, last month on a yearly basis since February 1962, when deflation amounted to 2.1 percent, according to official data released on Friday by the Hellenic Statistical Authority (ELSTAT).

This has been the only year since 1959 during which inflation has been negative for eight consecutive months. The phenomenon does not of course signal the strengthening of competition in Greece to the extent that prices are going down. Rather, it constitutes yet more proof that the Greek recession is ongoing.

Prices are falling, even though they are not in harmony with the reduction in salaries and pensions, because demand has been limited and imports have been reduced.

Compared to September 2013 the CPI has declined by 0.1 percent, with the drop contained by the increase in consumer participation in the retail price of pharmaceutical products. Drug prices went up by 17.6 percent within one month.

The only group of products that has seen an increase compared to last year is alcoholic beverages and tobacco, by 3.5 percent, mostly due to the rise in the price of cigarettes. There are certain products in other categories that have shown a rising trend in their prices but they constitute a minority in the so-called product basket.

Food and non-alcoholic drinks posted an annual drop of 0.5 percent, mostly due to the drop in the cost of meat, fish, vegetables, cereals, refreshments, fruit juice and sweets. Part of the decline was offset by the price hike in dairy products and eggs (1.7 percent), fruit (4.1 percent) and potatoes (11.2 percent).

There was also a notable fall in apparel by 1.1 percent, a group of commodities that had hitherto appeared to be inflexible. Housing showed a 0.7 percent decline in rental rates and maintenance costs, though part of the decline was offset by the increase in electricity rates.

The group with the biggest decline, of 4.8 percent, was that of “other goods and services” thanks to the drop in the prices charged by hairdressers and barbers, the cost of personal hygiene items and in transport insurance premiums.

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