The volatile course of inflation – Padovanews

The volatile rush of inflation
In June 2022, inflation will continue to accelerate in Italy by + 8% on an annual basis, according to definitive Istat data. To find greater growth, it is necessary to go back to January 1986 (+ 8.2%). Things are not going better in the EU countries, where inflation reached + 8.6% in June, a record level that exceeded the 8.1% recorded in May. The component that has the greatest influence on this increase is energy. Runaway inflation also in the UK where the consumer price index marked an increase on an annual basis of 9.4% and in the US which recorded an increase on an annual basis of 9.1%, the highest since 1981. The reasons why inflation and goes up? As far as the eurozone is concerned, the main reason is the energy costs due to Russian gas, a consequence of the conflict in Ukraine. But this was only the last blow. Upon closer inspection, inflation began to rise again in August 2021 with the reopening of many economic activities following the closures due to the pandemic and rising energy prices. This is the current situation. But how has the purchasing power of money changed over the years? How has the composition of the basket of goods and services evolved? How much has inflation affected the price of consumer goods? Adnkronos and Expleo’s data factor draw a picture of inflation from the analysis of data from Istat and Eurostat.
How the basket of goods and services changes
In order to monitor the trend of inflation, the price changes of the so-called “basket of goods and services” are recorded, ie the set of consumer goods and services that households can buy. The basket is an important indicator of the current consumption habits of the population and is updated every year by Istat. For example, products such as the PC chair, the oximeter, the Rapid Tampons, the Air Fryer, the mat for gymnastics, individual psychotherapy have entered the 2022 basket. Clearly, these are goods and services that have become mass consumption due to changes in habits due to the pandemic and periods of lockdown. If you are making a journey through time, it is interesting to note how the basket has changed over the years. For example, with respect to the years 1967-1970, the atlas and the tips were removed. As recently disappeared in 2015 CDs in public telephone services 2018. The computer was introduced in the basket from 1986 and only from 2002 to the chewing gum.
Food and transportation weigh more on spending
The basket of goods and services is updated annually by updating the weighting coefficients, ie the degree of importance of each article or category of products and services in the basket itself. This is to ensure that the weight system used to estimate inflation best represents consumer spending. Data from the Istat 2022 basket show that the largest weight is in food and alcoholic beverages (19.46%), followed by transportation (15.32%). Third point, costs for housing, water, electricity and fuel (11.62%). Compared to the year 2021, the most significant increase in transport expenditure is by 1.98 percentage points.
Consumer price index in Italy: + 5% compared to 2015
Inflation is measured by the “Consumer Price Index”, a statistical indicator that measures the changes over time and the prices of a basket of goods and services. In the euro zone, inflation is measured by the Harmonized Index of Consumer Prices (HICP), where “harmonized” means that all EU Member States adopt the same methodology. Individual countries are weighted based on their share of total consumer spending in the eurozone. According to Eurostat, in Italy from 2015 to 2021 the HICP increased by a total of 5 percentage points. Assuming the base index 100 to 2015, the category of products and services that recorded the largest increase in 2021 is that of alcoholic beverages and tobacco (+ 9.7%), followed by transport (+ 8.3%) and Goods and various services (+ 8)%). Also noteworthy are the significant declines in the average annual index of communication (-10.1%) and schooling (-18.3%).
The burden on inflation in Europe
If we look at the Eurostat data on the harmonized index of consumer prices for the various European countries, we can see that from a base of 100 in 2015, the average in 2021 is 108.82, with an increase of 8.82 percentage points. In particular, taking into account the last three years, the European countries that have suffered the most from the inflation burden are: Poland (+ 9.06%), Hungary (+ 8.75%), Czech Republic (+ 6.77% ). The lowest values ​​for the same period, 2019-2021, were recorded in Greece (-0.69%), Portugal (+ 0.81%), Cyprus (+ 1.13%).
Alcohol and tobacco are most affected by inflation
At the level of the categories of goods and services, the highest values ​​recorded by Eurostat in 2021 relate to alcoholic beverages and tobacco with a European average of the harmonized index of consumer prices of 119.02, followed by hospitality and catering services (112, 38) and the food category (111,13). While in many countries the article alcoholic beverages and tobacco is most affected by inflation, in Ireland and Sweden housing in other categories (water, electricity, gas) are in first place with 120.7 and 116.93 respectively. . In Spain, on the other hand, the category most affected is that of food with an index of 109.89.
The Italy-US confrontation
We said at the beginning of the article that inflation is not doing well abroad today either. But what has been the trend of the average consumer price index in recent years in the US, even compared to the Italian? Thanks to OECD data, we can see that from 1996 to 2015, inflation in Italy has grown faster than in the US, in the last six years (2015-2021), instead of a larger increase in the US of 14 , 3% in comparison for our country the index rose by an average of 4.7%. Focusing on individual categories of goods and services in the US, almost all categories (excluding “communications”) recorded record increases in 2021, increasing alcoholic beverages and tobacco to a greater extent + 21.2% and spending on housing + 19.5%.
Petrol and diesel: prices have doubled since 2005
For anyone who drives a petrol or diesel vehicle, refueling has become a nightmare, especially lately, where fuel prices have skyrocketed. In fact, from the analysis of the data provided by Mite, Ministry of Ecological Transition, the price of fuel has practically doubled from 2005 to today. Indeed, in January 2005, petrol cost € 1,088 per liter on average, while in July 2022 it reached € 2,028 per liter. However, the highest price was reached in March this year, € 2,185 per liter. As a percentage, the increase in the average price of petrol between June 2005 and June 2022 was 68%. It was no better for the other fuels. Since 2005, diesel has increased by 81%, LPG by 50% and heating oil by 90%, the price per liter has risen from 1,024 to 1,970 euros.
Increasingly expensive bill
When the cold sweat fills the car, Italians know no more than a saint to choose from to deal with dizzying costs for electricity and gas bills. Blame for inflation which has led to endless increases in electricity and gas prices. From a base index of 100 for 2015 onwards, Eurostat 2021 recorded an average index of 111.3 in our country, with an increase of 11.3 percentage points in consumer prices for electricity, gas, solid fuels and heat energy. A really significant increase, especially last year: in 2020, the annual average index was 95.8.


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