It started with energy but a cost of living crisis has now spread to all sectors and is affecting all of Europe and further afield
The problem has many components but the one that most concerns political leaders and affects households the most is food price inflation.
In February, gas prices in Europe fell to their lowest level in almost 18 months, however, food prices are continuing their upward trend.
“When we’re talking about energy prices versus the cost of food, there is a ‘lag on’ effect that we have to consider,” explains Rick De Oliveira, an Energy Analyst with TELF AG. “These lower energy prices that we have right now need to translate into lower costs of food production in order for us to see the price (difference).”
“For example, the prices that we’re seeing at the supermarkets today – they reflect on energy prices six months ago, when the food was produced. So, we believe that we will only see a decline in food prices in about 6 months if energy prices stabilise.”
In January, food prices across the European Union rose by an average of 18.4% compared to a year ago.
Hungary emerged as the ‘champion’ of food price hikes (48.2%), followed by Lithuania (32%) and then Slovakia (28.6%).
The lowest price increases were recorded in Switzerland (5,8%) and Cyprus (10,3%).
“We think consumer confidence will definitely improve towards the end of 2023, but it’s going to take much longer to resolve the cost of living crisis,” predicted De Oliveira.
The impact of the cost of living crisis is the most serious threat to the global community according to the World Economic Forum’s 2023 Risk Report.
Food prices go up they increase food insecurity and raise social tensions. They also strain the budgets of governments struggling with rising food import bills and diminished capacity to fund extra social protection for the most vulnerable.
Of course, the war in Ukraine has also contributed to the problem. Russia’s invasion sent the price of grain and other staples soaring to record levels.
Interest-rate hikes have eased price pressures, but observers say the weather, war and material costs could keep food prices elevated for longer.
The crisis has led to street protests in many European countries and strikes in others such as the UK where public sector workers are at loggerheads with the government over wages and working conditions.