News Inflation monitor
Rabobank expects higher inflation
Rabobank expects inflation for the whole of 2022 to be higher than previously thought. The bank is revising its inflation forecast for this year upwards to 5,5%. That was previously 4,2%. The war in Ukraine is resulting in higher prices for energy, food and raw materials.
Inflation was slightly lower last month than in January. Prices in February were on average 7,2% higher than a year ago, according to an initial estimate by Statistics Netherlands (CBS). Almost 60% of this was due to higher energy prices.
Foods more expensive
Many foods have become more expensive in the past four weeks, especially salt, coffee, meat and pasta sauces. On average, the price level in the supermarket rose by approximately 0,5% compared to the end of January. Butter, margarine and coffee in particular became more expensive on the shelves (13%). Fruit preserves and pasta were sold for 11% more and Dutch meals were 10% more expensive. Wine, sausage, spirits, frozen meals, apples and pears remained equally expensive. Compared to February last year, food prices are about 5% higher.
Rabobank has revised its inflation expectations considerably upwards. "For the whole of 2022 we now assume inflation of 5,5% (previously 4,2%) and for 2023 we expect 2,9% (previously 2,5%). New information points to a tighter-than-expected shortage economic growth was also higher than expected in the last quarter of 2021. This will bring the economy closer to its potential production level than previously anticipated. This is causing more upward price pressure," the bank writes in the so-called Inflation monitor.
War noticeable on the balance of the baker and margarine and sauce producer
The war in Ukraine also plays a role. "Ukraine and Russia are important exporters of various agricultural products and we are counting on higher prices for oilseeds and grain. For example, bakers and margarine and sauce producers will notice this in their profit & loss accounts in the short term. In addition, Ukraine is an important producer of feed maize and Russia of ammonia and other basic components of fertilizer. A price increase of these input costs for arable farming and animal husbandry can eventually lead to more price increases further down the chain."
In addition, the bank expects an effect of 2022 percentage points in the second half of 0,5 due to the release of the rent freeze and the return to the normal tuition fee rate. "In addition, entrepreneurs across the board have been feeling pressure for some time to pass on the persistently high energy, material, transport and production costs in their selling prices. This pressure is expected to increase now that the prices of energy and raw materials such as gas and grain to rise even further because of the war."
Higher inflation rate in prolonged conflict
Rabobank currently assumes 'a short-term disruption of international trade' and assumes that the prices of energy, food and raw materials on the world markets will fall again later this year. "All in all, we do take into account an inflation rate of above 4% up to and including November." But it is also possible that a protracted economic conflict will arise. "Disruptions to energy supplies from Russia cannot be ruled out either," the bank said. “In that case, energy, food and commodity prices will rise even faster and remain high for longer. In such a scenario, inflation could rise to 2022% for the whole of 8,2 and it could then take until mid-2023 for inflation to fall back below. the 7% dive."
Linda van Eekeres
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