ECONOMY

String of steep price hikes in basic necessities raises concern

Recent steep price increases in wheat, animal feed and fuel oils have created an explosive inflation mix, giving rise to concern on the extent of its future impact on the typical household’s weekly shopping list. Already, the typical list costs 8.5 percent more than a little over a month ago. Indeed, the basic foodstuffs included on it have risen by an average of 14.5 percent. And 70 percent of consumer spending goes on foodstuffs. Milk prices went up yesterday. Vivartia, which has the dominant market share, put up its Delta brand by 4 percent; it now costs 1.34 euros per liter. Olympos, its staunch competitor, notified supermarkets, according to sources, that it will raise its prices by 8.5 percent, to -1.59 per liter, on October 16. Mevgal has also said it will charge more as of October 22. Producer prices have risen substantially. From 34.14 cents a liter in July 2006, the price of fresh milk stood at 37.14 cents a year later and about 41 cents at the end of September. The price of flour went up 15.8 percent on Saturday, and of spaghetti 25.8 percent. Eggs are up about 30 percent. It may sound paradoxical, but both supermarkets and food industries, traditionally at odds, fear that such steep raises will ultimately dent demand, as consumers curtail spending and increasingly turn to private labels and discount chains. Both sides fear the loss of market shares and the recent steep increases may soon be followed by a spate of offers. To be sure, price increases on basic foodstuffs do not affect just the consumer but the entire catering industry and these effects may not be immediately foreseeable. Oil, too, impacts prices throughout the economy, and not least those of fresh produce which is largely cultivated in greenhouses. Families with children also felt the pinch of the 4.6 percent rise in private school fees. The Development Ministry is now starting checks to ascertain whether the set norm is actually being observed. To this hike, one must add the higher cost of school materials. According to the Consumer Protection Center, the average cost of these for primary school students has gone up by 12.90 percent to 139.51 euros, while for secondary school students it has gone up by more than 30 percent. Such costs do not include that of auxiliary and foreign-language books. Energy costs push Sept inflation to 9-mth high Greek consumer inflation accelerated to a nine-month high in September, mainly due to an unfavorable base effect from energy prices, the National Statistics Service (NSS) said yesterday. Both the headline and the EU-harmonized readings picked up to a 2.9 percent annual pace in September from 2.7 and 2.5 percent respectively a month earlier. Greece suffers from a stubbornly higher inflation rate versus the eurozone average. Upward price pressures erode its economy’s competitiveness and may cost jobs in the longer term, the central bank has warned. NSS head Manolis Kontopyrakis attributed the rise to higher energy prices in September, compared with the same month a year earlier and projected a slight pickup in October as well. «The rise in the consumer price index in September was due almost entirely to the fact that in the same month in 2006 there was an 11.2 percent drop in the price of gasoline,» he told reporters. In the 13-member eurozone, consumer inflation rebounded in September, rising above the European Central Bank’s 2 percent price stability target for the first time in a year. Eurostat said it averaged 2.1 percent. Although it has slowed from an annual 3.8 percent pace in July last year, Greek consumer inflation remains 80 basis points higher than the eurozone’s average. The government projects it will average 2.6 percent in 2008 from 2.7 percent this year. «We saw an expected acceleration in inflation in September, which reflects the end of a period of favorable impact from energy prices. These are now exerting upward pressures,» said economist Nick Magginas at National Bank. Inflation is being closely watched by Greek labor unions ahead of next year’s incomes policy for the public sector, yet to be spelled out by the government. Greece will aim to shrink its budget deficit to 1.7 percent of GDP in 2008 from an estimated 2.5 percent this year. (Reuters)