How far can the price spiral go?
The costs of oil and raw materials are slowing, but this is not the case for those, now out of control, of gas and electricity. And it is feared that a mechanism like the one recorded in the 1970s will be triggered
In August, inflation on an annual basis reached 8.4%. An increase that has not been recorded since 1985. Video Everyone's fear is that a 'spiral' effect will be triggered, a mechanism, like that of the 1970s, which first saw an increase in prices, then an increase in wages and finally a new increase in prices. However, this spiral has not yet been activated. There has not yet been a sharp rise in wages, but there is still an attempt to mitigate the loss of purchasing power caused by inflation.
According to some perspectives, inflation could reach 10%. The “time” variable at this point is fundamental. Central banks are raising interest rates. But, while we see that the cost of oil and sea freight rentals are falling, that the prices of raw materials such as durum wheat, coffee and sugar - which had soared due to the very strong restart of the economy after Covid - are slowing down or flattening out, the only voice completely out of control in Europe is the price of gas, and therefore of electricity, due to the war in Ukraine. It is not subsiding and no one knows where it might go. Prices are starting to become unsustainable for businesses and right now we don't know if there will be real rationing. Governments have intervened to reduce the impact of high energy and high oil prices, but if this situation persists, at some point there will be pressure on wages, especially for employees. This is why we are asking for a reduction in the tax wedge, to leave more money in the paycheck.
Are there still unjustified speculative increases on consumer products? Yes, because when everything increases, there are always those who take advantage of it. However, producers and distributors of food products of the so-called large-scale distribution, report that they have tried not to pass on all the cost increases in the increase in prices, so as not to see reduced purchase volumes. And those who compete on international markets know that they must be careful: if the prices are too high, the competitors win.
