Consumers in Greece feel even more financially stressed, as despite the slight de-escalation of inflation in January compared to December, food prices remain high. Tomorrow, Thursday, ELSTAT is expected to announce the national inflation index for January, although Eurostat’s data on the harmonized index have given an idea of how it “entered” 2024, as reported by ot.gr.
According to them, the harmonized index of consumer prices moved to 3.2% from 3.7% in December, which shows that momentum is being maintained, although some analysts estimate that the decline will continue, despite the continuation of the two wars in the wider our neighborhood, but also the issue of the Houthis. At the same time, there are second thoughts, as the geopolitical environment is very fluid.
Reduction in consumption
The main issue remains the continued price increases in basic products, which affect consumers. For this reason, the managers of this particular market also estimate that there will be a substantial drop in consumption. It is typical that according to the ongoing survey of trends in FMCG Retail by the Consumer Goods Retail Research Institute (IELKA), a decrease in sales volume is expected in the first half of 2024 (-1.3%) compared to the corresponding half of 2023. Also, an increase in the value of sales is expected in the first half of 2024 (+1.6%) compared to the corresponding half of 2023.
Income problems
At the same time, as Alpha Bank points out in its weekly report on the Greek economy, gross disposable income recorded a decline in 2020 due to the pandemic and the measures to restrict economic activity that were put in place, which exceeded the corresponding decrease in the Harmonized Index Consumer Prices (-5.1% vs. -1.3%). Then, in 2021, disposable income recovered at a significantly higher rate than the HICP (7.6% vs. 0.6%), which is largely attributed to base effects, as economic activity gradually began to normalize.
However, despite the fact that in 2022 disposable income recorded an equally significant increase (7.6%), inflation was at a high level of 9.3%, eroding the real disposable income of households. In the first nine months of 2023, the losses in real terms were partially offset, as the rate of increase in nominal disposable income was significantly higher than the rate of increase in the HICP (7.4% vs. 4.4%).
Pessimism
The continued pessimism of households is also reflected in the consumer confidence index compiled by the Institute of Economic and Industrial Research (IOBE), which worsened in January 2024 and stood at -46.3, the worst level since February 2023. 59% of households expects a worsening of their financial situation in the next 12 months, 60% predict a rise in prices, while 63% consider that their financial situation can hardly be predicted, an element that shows the high degree of uncertainty.
A matter of livelihood
According to INE/GSEE data (January 2024) the wave of precision sweeps all incomes and dissipates the purchasing power of millions of low-wage and low-pensioners, while many households are even facing a crisis of survival, as they cannot meet their basic monthly expenses.
It is typical that 7 out of ten workers state that they cannot cope with their obligations, 55% have reduced overall food purchases, 75% have canceled entertainment expenses, 15% have increased their working time or found second job in order to make ends meet, while 1 in 3 workers “eats from scratch” using money from their savings to cover their purchases.
The revaluations
Charting the income crisis causing the precision rally in the last three years (2020 – 2023) he notes that increases in basic food items have soared. Specifically, the price increases in oils and fats reached 87.4%, in vegetables 35.2%, in dairy and eggs 33.8%, in meat 31.2%, in bread and cereals 25.3% , in electricity, natural gas and fuel 39.1% and in rents 8.3%.
During the same period, the real average wage decreased. Specifically, the reduction was of the order of 8.7% compared to 2021, while despite the nominal increases of the last two years, the purchasing power of the minimum wage in October 2023 was at the same level as the purchasing power of the real minimum wage of 2015. “Greece is at the bottom of wages and champion of prices and profitability in Europe”, notes INE.
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