Basic products such as bread, oil or fruit keep their price while the industry still asks to wait “weeks”.
The VAT reduction on basic food has not yet had an effect on the high shopping basket that Spaniards have been saddled with in recent months. Not forever. Not bad. The prices of products such as eggs, bread, milk or oil have drifted in their own way on the slope of January 2023. And they have not exactly made it easier to overcome this first month of the year, mostly determined by the high spending of the Christmas and weak economic expectations.
After weeks of negotiations on the measures of the third major government package to deal with the consequences of the crisis caused by the war in Ukraine and rising prices, food inflation shows no sign of abating. In the absence of the final CPI data for January -the 15th will be known-, there is nothing to indicate that trips to supermarkets have been cheaper than at the end of last year. Food inflation ended December above 15% – the general rate is now 5.8% – and with the data this newspaper has obtained from some of the major distribution chains, the new VAT is barely mentioned on the purchase receipt.
Of the seven commodities that have been analyzed and compared weekly from the beginning of January to this week, the conclusion is firm: _prices have barely moved. And if they have to go up in some cases. They are the least. Like the PVP (Retail Price)_which really dropped this month. Only in very specific circumstances. And only one or two cents.
Of the thirty products analyzed in four chains (bread, eggs, zucchini, apple, flour, olive oil and macaroni), price fluctuations have only been verified in eight cases this month. One half to increase them and the other half to decrease them compared to the January 1st references.
Over the same period, reports on food prices prepared by the Department of Agriculture reflect large fluctuations in costs, rising in the first half of January and further falling in the second half of the month. Although those quotes do not go directly to the shopping cart.
When the Executive approved the VAT reduction from 4% to 0% for bread or milk, among other things, and from 10% to 5% for oil, among other things, various calculations estimated that this measure would result in an average saving of about two euros. one month.
Consumer organizations such as the OCU have warned this month that distribution companies have applied unfavorable price rounding to consumers, cheap products disappearing, forcing the user to buy a more expensive brand, real VAT reductions not being applied and even price increases.
The perception is that the shopping cart has ignored this fiscal measure. Why?_Fundamentally, as explained by Javier Millán-Astray, general manager of Anged (National Association of Large Distribution Companies), because “as Minister Planas noted, there is still a margin in this quarter to show the moderation of prices in the shopping cart.” The person in charge of this organization points out that “it will be in a few weeks”, but not yet.
Several sources in the food and processed products value chain insist they still carry very high costs. And when they talk about costs, they almost exclusively talk about energy, transport and raw materials. In the first case because the electricity contracts signed at the time have not yet expired. And they were initialed with very high prices, in many cases both electricity and gas set records during the past summer. Linked to this reality of long-term contracts are a portion of suppliers’ transportation costs, which are priced on a quarterly basis. And because prices of raw materials have fallen on international markets (according to data from the FAO, among others), these low costs take time to translate into the final product. “There is still significant price pressure in the industry,” said Anged.
All producers, farmers, ranchers and especially the food industry and distributors are grateful for the VAT reduction. But it has so far hardly served the consumer to notice this measure. An additional reduction in VAT on meat and fish is on the horizon, as some opposition parties are asking the government. Or the price cap itself, based on a limited-cost shopping cart, as Vice President Yolanda Díaz points out. The evolution of the shopping basket will determine what the next step can be to avoid escalation in the stores while the rest of the costs continue to slowly decrease.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
