• Cooling commodity prices have not helped mitigate food price pressures in Europe.
As of April 2023, most food commodities are trading at levels close to or slightly above those of 2021. Although some remain expensive, we saw similar prices in 2013-2014 without a large increase in food inflation. Packaged-food producers are behind most of the price pressures.
• Some food inflation remains “unexplained” due to catch-up profit-taking. This could stem from firms in the food sector making up for the difficult months between March and June 2022. We find that most firms have managed to increase turnover beyond costs since then.
• Consumers will continue to pick up the tab. As PPI have just turned a corner, expect prices to continue increasing until the summer and remain at elevated levels. We estimate that households have lost between 1.1% and 9.2% of purchasing power over the past year, with Eastern European countries being hit the hardest. A further increase in food prices by +20% could lead to about 1-pp drop in consumption in the