MADRID – Inflation in Spain, especially in the area of food, continues to put pressure on households. According to recent projections, food inflation will not return to normal until mid-2024.
Despite a fall to 1.9% in June, food inflation has stalled at 10.3%. Camilo Ulloa, an economist at BBVA Research, stressed in El Mundo newspaper that inflation will have a lasting impact on households. While there are signs of a fall in prices, analyses suggest that supermarket prices will not stabilise until mid-2024 and even then will still be above pre-crisis levels.
Measures to combat inflation
The government has taken measures to combat inflation, including a reduction in VAT on certain basic foodstuffs. The move should save families €1.32 billion this year, according to Treasury Department estimates. Nevertheless, these measures have not been able to compensate for the strong price increases. Products such as olive oil, rice, potatoes, milk, eggs and sugar have seen significant price increases ranging from 13.1% to 44.9%.
The cause of these price increases is a combination of factors, including rising energy prices, disruptions in supply chains, adverse weather conditions that affected crops, and the war in Ukraine, which disrupted grain trade.
Commodity prices fall
Although commodity prices, as measured by the Food and Agriculture Organisation of the United Nations (FAO), have been falling since March 2022, it is unclear when this decline will feed through to final consumer prices. Experts suggest that, based on historical trends, it takes an average of a year and a half for food inflation to stabilise after a fall in the FAO index.
The government has also introduced other measures, such as a €200 cheque for vulnerable families. However, this measure has not had the desired effect as less than half of the intended beneficiaries have benefited.
Consumers adjust their purchasing behaviour
In response to rising prices, consumers have adapted their purchasing behaviour by searching for special offers, comparing prices between different supermarkets, opting for cheaper private-label products and replacing fresh food with frozen products. These changes are reflected in the declining sales volumes of the main supermarkets in the country.
Also read: The cheapest and most expensive supermarkets in Spain
