April inflation decelerated for the 10th consecutive month in the United States. In Europe the picture is more complex with the Euro Area accelerating slightly but most countries in the EU showing a significant decrease in the inflation rate.
The latest data shows that annual inflation in Romania reached 11.23%, a level not seen in more than a year, writes eToro analyst for Romania, Bogdan Maioreanu. But food prices continue to increase more than non-food items, though at a slower pace than last year, and there are risks that they will continue to grow this year.
In the past year, food prices in Romania increased by almost 20%. The champions are sugar with an increase of over 58%, followed by butter (35%).
The increase in sugar prices is not limited to Romania. Is a global phenomenon. The European Union is the world’s leading producer of beet sugar, with around 50% of the total amount. However, beet sugar represents only 20% of the world’s sugar production, with the other 80% produced from sugar cane. Brazil is the largest global producer of sugar followed by India.
Unfortunately the pressures on the sugar prices will remain high because the industry is predicting a lower production this year due to weather concerns. In Europe the sugar beet production is also forecasted to be lower due to drought. Meanwhile the consumption increases and part of the crop is diverted toward ethanol production.
Butter has shown a sustained increase in prices in the last couple of years. On the international markets the prices increased with over 37% in 2021 and over 43% in 2022, due to increased demand and limited supply. But the beginning of this year is showing a steep decrease in prices.
The commodity – Butter 82% fat – sold at 463 Euro per 100 kg. Last year during the same period, the price was over 700 Euro per 100 kg. The explanation might come from the weather evolution. Cool weather in northern Europe is suppressing supermarket sales and consumption of cream products, such as frozen dessert items, making abundant cream supplies available to the churns. Butter churns are running full schedules. But the prices are still at higher levels than in 2020.
There are risks for the food prices that are coming from the weather, the possibility to see bad crops or shortages of vegetables, the sustained demand and the need for higher profits of the companies due to inflation. All these might keep food prices high during 2023. In the United States, where food inflation had a similar evolution as in the EU in the last year, rising by 8.5% from March 2022 to March 2023, the Department of Agriculture predicts food prices will continue their climb in 2023, though at a lower rate, rising about 6.5% over their 2022 levels.
If we compare Romania April data with the EU countries that already reported inflation figures, food prices in our country increased less than the 39% increase in Hungary in the past year. Above us are Estonia, Lithuania and Latvia. But the food prices in Czechia increased only 17%, in the same range as Germany and Moldova. In France food prices increased by only 14%, the ones in Greece by 11% and in Cyprus just by 6%. And most European prices are above the 7.7% increase in food prices posted in April by the United States.
For Romanian investors, the recent deceleration in inflation is good news. According to eToro Retail investor Beat survey, inflation is their main cause for concern both this quarter and during the whole 2023 year.
