Only in Germany food is more expensive than in Spain

Nieuwsbericht | 15-12-2022 | 12:10

Although Spain is now the country with the lowest overall inflation, due to the containment of electricity prices, it leads the large EU economies in terms of food price increases, only behind Germany.

Spain has managed to go from being one of the European economies with the highest inflation to being the country with the lowest price increase in November 2022, that according to Eurostat's harmonized data, it is 6.6% year-on-year. However, this relief from rising prices has not been passed on to foodstuffs, where Spain is the leader, behind Germany, among the major European powers.

Spain's food price increases higher than in the Netherlands, Italy and France

In October, the latest period published by the National Statistics Institute with data broken down by type of product, food prices in Spain rose by 15.8% over the same period last year; this is a record increase since 1986.

In the rise in prices, milk stands out, which has shot up 25% in a year; eggs are now 25.5% more expensive; vegetables, 25.7%; chicken, 18.3%; rice, 16%.

Of the five large EU economies (Germany, France, Italy, Spain and the Netherlands - from highest to lowest GDP volume), Spain, with 15.8%, ranks second only behind Germany as the country with the highest increase in food prices. The rise in Germany was 19.9% in October of this year. In France, the increase was 13.2%, in Italy, 13.8% and in the Netherlands, 14% (Fig. 1). The average for all EU countries is 17.8%.

Fig. 1. Year-on-year % rate of food inflation in October 2022

Evolution of food price increases

Spain is at the head of the five countries with the greatest economic weight -those which are comparable- in the rise in the price of many food products.

Eggs have risen by 25.5% in Spain, 19.8% in Germany, 19.7% in the Netherlands, 19% in Italy and 14.8% in France. Fruit has soared by 11.8% in Spain, while the increases in the rest are lower: 7.9% in France, 6.6% in Italy, 6.3% in Germany and 4.7% in the Netherlands. The same has happened with wine and beer.

In many other basic foods, Spain is in second place in terms of rises in this group of five EU cuntries. Thus, bread and cereals have risen by 19%, behind Germany (19.6%), but ahead of increases in Italy (15.9%), the Netherlands (11.3%) and France (11.2%). This was also the case for yogurts.

In other products such as meat, rice, cheese or olive oil, the increases recorded in Spain are in line with those of the other four Member States.

A situation mainly affecting low incomes

The rise in food prices in a generalized inflation environment is particularly worrisome because food is a product with very little elasticity. For this reason, food inflation affects all families, being especially detrimental to the purchasing power of families with lower income levels, since these also are the ones that spend a greater proportion of their expenses on food purchases.

According to estimates by the Ministry of Agriculture, Spanish households spend around 15% of their income on food. This percentage rises to 19.2% if families have an income of 1,000 euros or less and drops to 11% if they have an income of more than 5,000 euros.

These difficulties seem to become even more evident in the run-up to Christmas. For this reason, the government, aware of public concern, says it is preparing a third anti-crisis package in which it will try to alleviate food inflation.

Measures to curb the rise in food prices

The Spanish government is studying measures to contain food prices and will present them before the end of the year. The option of approving measures to alleviate the rise in food prices is now back on the agenda, after the controversy unleashed in September, when the Second Vice President called for a cap on the price of basic foodstuffs. This provoked the frontal rejection of the entire food chain as well as the Minister of Agriculture himself.

Although it has not been specified how these measures will help families, it was said that it would not be through a reduction in VAT, which is what the supermarket chains requested last September. There is talk of enabling some direct aid focused on the most vulnerable households.

The communist approach

The communist party Podemos, which forms the government coalition with the Socialist party, intends to propose a tax on supermarket chains, to tax 33% of the supermarkets "extraordinary profits" as a consequence of high inflation rates. This would make it possible to distribute an extraordinary check of between 200 and 300 euros to a maximum of seven to eight million vulnerable families.

The cost of this new aid is estimated to be between 1.4 billion and 2.4 billion euros. The profit of the five leading retail chains amounted to less than 1.4 billion euros in the last fiscal year.

Lower tax burden

The sectoral organization of the food and beverage industries, FIAB, believes that fiscal measures such as lowering VAT or a one-year moratorium on the entry into force of the new tax on non-reusable plastic containers, could control the upward trend in food prices.

The retail sector attributes the drift in prices to the increase in the cost of energy, fuel and raw materials. For this reason, they understand that the government must guarantee better access to energy, in line with that of the electro-intensive industries, which would reduce production costs. The sectoral organization ANGED also points to regulatory costs and recalls that the government has approved "some thirty measures that increase costs in different ways”; among these rules are the rise in VAT on sugary drinks or the new labeling requirements regarding co-official languages.

mad-lnv@minbuza.nl

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