Recent developments in euro area food prices
Prepared by Ieva Rubene Food prices can be an important driver of euro area headline HICP inflation, as food accounts for almost 20% of the HICP consumption basket and food price inflation is highly volatile.
- Prepared by Ieva Rubene Food prices can be an important driver of euro area headline HICP inflation, as food accounts for almost 20% of the HICP consumption basket and food price inflation is highly volatile.
- Against this background, this box reviews recent developments in euro area food prices in an environment that has been affected by the coronavirus (COVID-19) pandemic.
- The April 2020 surge in euro area food prices was strong even in the light of food prices having been volatile in the past.
- The month-on-month increase in total food prices reached an exceptional 1.1% in April, a rate almost never observed since 1999 (excluding the few temporary large hikes due to changes in indirect taxes).
- As food prices are highly seasonal, especially for unprocessed food, changes in a given month should be compared with the same month in other years.
- Although the increase was less pronounced for overall processed food prices, it was clearly higher for certain items such as bread, pasta and other flour products, as well as meat.
- Chart A Monthly price developments in euro area consumer food prices during the COVID-19 lockdown (month-on-month percentage changes; non-seasonally adjusted data)
- Food production in the euro area is characterised by strong supply linkages within the sector.
- According to the euro area input-output table, the main input for the manufacturing output of the food sector is domestic processed and unprocessed food products (approximately 40% of all inputs).
- Food products imported from outside the euro area only make up a small share of the food sectors total production costs (around 5%).
- [6] Overall, this suggests that the disruption of supply chains within the euro area, including distribution networks, that has been observed during the COVID-19 pandemic may have had important implications for the food supply and, therefore, prices.
- Detailed sectoral data for euro area imports do not provide the breakdown of food imports used for domestic production and food imports delivered directly to shops for household consumption.
- Nevertheless, data on total food imports can provide some information on which food products are potentially more sensitive to supply chain disruptions.
- Eurostat trade data for 2019 show that around 40% of food imports from outside the euro area were from the other EU countries (including the United Kingdom).
- However, there is also substantial trade in food products within the euro area.
- Chart B Composition and direction of euro area food imports in 2019 (percentages of total euro area imports of food products)