As we are highly impacted by inflation, we decided to present you with a growth in price levels in Croatia for a specific category of goods and show a cumulative price level growth since the inflation started boiling.
We are all aware of double-digit inflation currently present in more or less the whole EU. Consequently, we decided to present you with an increase in price levels in Croatia for a few goods categories like bread, meat, milk, eggs, etc… Further, we put inflation in perspective since it appeared above the acceptable levels.
With that said, we emphasize that inflation is a theme that can start very wide and never-ending discussions that can go on and on. It is a very complicated matter with plentiful implications, underlying and dependents. We will only scratch the surface of why it is so complex, but in this blog, we will focus „just“ on what happened and which categories increased the most in price levels.
First things first, let’s just remind ourselves of where Croatian inflation currently stands. You can read it more details about it here. Overall, we note that December was the first month with a MoM price decrease, finally representing that growth in inflation is stopping. Further, with a new currency under ECB, January was the first month the Croatian Bureau of Statistics published preliminary inflation data already. January MoM inflation amounted to 0%, which is something to emphasize.
Croatian CPI (January 2013 – January 2023, %)*
Source: DZS, InterCapital
*Data for January 2023 based on the 1st estimate
Now let’s just slightly dig into why inflation can be tricky and why it’s a very complicated matter if viewed only superficially.
Inflation is commonly known as an increase in the general price level of goods and services in an economy (for the general public it translates into the phrase „inflation means the money loses its value“). But let’s get more specific here. We said inflation is an increase in the general price level. So, the current general price level is already an important factor in the calculation of inflation that can easily pass under the radar. And inflation is not equal to a price level but equal to an increase in it. So, with that said let’s get to the point. Last week, the first-ever flash estimate of the Croatian CPI was published, amounting to 12.7% YoY, while it stood steady a MoM basis. But, what does the mentioned 12.7% inflation actually says to us? That price increased 12.7% on a yearly basis, of course. But the prices in January 2021 were already influenced by higher single-digit inflation.
Consequently, we decided to present you with how much the prices increased since the inflation started „boiling“ to actually present you with numbers that might mean something and give an accurate representation, rather than just saying „inflation is 12.7% YoY“. In this month specifically, the mentioned preliminary inflation for January 2023 is 12.7%. But, this means prices increase 12.7% after already being higher by 5.7% YoY in January 2021, meaning that the overall increase in prices is more elevated than „just 12.7%“ if we compare it to January 2020, the point from when inflation actually started to occur.
Therefore, to simply conclude everything said, we decided to present you with how much the prices have increased since the beginning of notable inflation with the goal of showing that overall increases in prices are significant. For this, we used annual average inflation for the period.
Annual average CPI growth compared to 2020
Source: DZS, InterCapital Research
To further decompose mentioned inflation, we decided to present you with specific food categories like bread, meat, eggs, etc… We find price changes for those categories to be highly informative for an individual to get a sense of how the prices developed. Moreover, those categories make up for a more relative share in consumer income for an individual with lower income in absolute terms. For the mentioned, we used data from Eurostat, which Eurostat started publishing just this month.
However, we do note that this calculation of price changes slightly differs from the calculation for the Croatian CPI numbers as Eurostat uses the Harmonised index of consumer prices with a goal of comparable price developments across the whole EU and Euro Area, while Croatian Bureau of Statistics uses its own method and basket of goods for calculating CPI. With that said, below you can see the price changes of a few selected categories.
Price changes for December 2022 compared to December 2020 (%)
Source: Eurostat, Intercapital Research
For this, we compared the latest data for December 2022 with December 2020, so again – comparing with the data before the inflation took its toll. One can notice the biggest reported increase in prices was noted for eggs, which one could have already seen in media in the previous month and it amounted to a 69.1% increase since the inflation began. Potatoes are closely following with a 60.4% price increase. Further, bread and sugar both noted an increase of 48.6%, while the category Milk, cheese & eggs increase by 42%. Overall, food as the whole category increased by 29.9%. Also, we also wanted to emphasize that, unfortunately, wine and beer too, experienced double-digit growth in prices of 23.9% and 11.1%, respectively…
