Grocery prices are still soaring. How can that be?

Irish Times

14 hours ago

Early this month the latest data from retail analysts Kantar Worldpanel confirmed what almost anyone who has gone shopping in Irish supermarkets in recent months knows all too well: the cost of living crisis is not over and things are actually getting worse.
Its monthly research showed that the rate at which grocery prices are climbing in Ireland has more than doubled in the past 12 months, with prices in supermarkets going up at a rate of 4.96 per cent compared with the same 12-week period last year.
When Kantar went shopping this time last year, the annualised rate of inflation it recorded was closer to 2.5 per cent.
There are – of course – several ways to look at these numbers.
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Grocery inflation of 4.9 per cent is undoubtedly worse than a rate of 2.5 per cent but it is dramatically better than the rate of about 17 per cent Kantar ecorded at the height of the crisis in early summer 2023.
Shoppers might be forgiven, then, for thinking that things are better than they once were. But that would be quite wrong.
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For a household that spends €200 a week on groceries, a 5 per cent increase is costing them an extra €500 a year. But that 5 per cent comes on top of – and not instead of – all the other savage spikes that have been recorded over the past four years. That means many families are now down about €3,000 on 2021 on their supermarket spending alone.
Every couple of months since early 2022, when the cost of living crisis started in earnest, Pricewatch has been tracking the price of a basket of 25 items typically found in Irish supermarket shops. When we last did out supermarket sweep, in April, the basket that once cost €87.06 cost us €115.93, a jump of 33 per cent.
We had a look at just five of the products last week. Brennans Bread, which cost €1.87 in 2022, costs €1.99 now. A two-litre carton of Avonmore milk, which cost €1.99, now costs €2.69. A 200g jar of Nescafé coffee, which cost €6.50, is now €7.15. A kilogramme of chicken breasts that could have been bought for €4.99 then, costs €11 now; and a kilogramme of sirloin steak that cost €10.66 was selling for €22.56 last week.
Someone buying just these five items every week will spend €45.39, which, spread over the course of the next 12 months will cost €2,360.28. By contrast, the weekly spend on these items in 2022 was €26.01 or €1,352.52.
What is going on?
According to the Central Statistics Office (CSO), the consumer price index has climbed by just over 20 per cent over the past four years while grocery prices have climbed by closer to 40 per cent.
Oliver Browne, a lecturer in the UCC economics department, has a personal and professional interest in how we spend our money and the globalisation of markets around food in particular and how that affects our daily lives.
He is self-deprecating when talking about the role economists play in discussing what might be coming down the tracks, and recalls Dara Ó Briain once roasting a professor of economics who happened to be sitting in the front row of one of his shows.
'He basically said economics was the wishy-washiest of all the sciences and one which explains to people why something has happened after it has happened but we won't tell you it is going to happen beforehand.'
For all its failings, it is a useful guide to working out where we are and where we might be going.
Browne says we are in the middle of a perfect storm and almost everything that could go wrong – from wars in Ukraine and Gaza to the climate crisis and the dizzying uncertainty caused by the
Trump tariffs
– has gone wrong.
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On top of all the global uncertainty there are also severe pressures closer to home, he adds, including a lingering Brexit hangover, the housing crisis, a significant increase in the minimum wage – up from €10.20 and hour to €13.50 (an increase of 32 per cent) and dramatically higher energy costs – up more than a third over the past four years.
He notes that the Irish herd has been reduced significantly so the country can meet its climate change targets, which has put pressure on dairy and beef prices at home.
'Often the price of the food that is exported stays the same and, to make things balance, the price has to give somewhere and that tends to be here. We tend to try and keep our image up abroad for the sake of trades as opposed to keeping prices sustainable here.'
He says many of the products that frequently find their way into our shopping trollies, including wheat, coffee and cocoa, are commodities traded on global markets and when they climb on international markets they climb in our supermarkets too.
At the height of the crisis there were calls for the State to do something to help consumers with their weekly shopping and the Competition and Consumer Protection Commission conducted an investigation into pricing in Irish supermarkets that found no evidence of price gouging or profiteering.
Browne says retailers' profit margins are fairly thin but he also notes that those margins can be manufactured to a degree. It is in the retail chains' interest to ensure it 'doesn't ever look like they're making too much money. Their cash flow is extremely good and their executives are extremely well paid. They're not doing badly by any means but there's an expectation within the markets that these companies operate on low margins.'
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While there is no suggestion of any wrongdoing – it is a normal way of doing business – and there was no evidence of wrongdoing uncovered by the watchdog, consumers are still paying over the odds for many products.
Browne is against the State exerting pricing controls on retailers and says addressing 'big ticket' issues such as the housing crisis to make finding a home more affordable would take the pressure off consumers and businesses.
He also says consumers should place more emphasis on shopping locally and says it would have a positive impact and support local jobs and local businesses and put less strain on the local economy
'Ireland is not an outlier; nobody internationally has a grip on this. It is everywhere. We're looking at extreme global uncertainty driven by things outside of our control.
'If Donald Trump were to develop a more moderate trade policy and if we saw an end of the war in Ukraine and the end of the Israeli conflict – all of these things have impacts on our day-to-day lives, and if we had a more stable global economy, prices would kind of come down but there is very little we can do.
'Maybe in the good old days, the prices we were paying were maybe too low for what we were actually getting and perhaps the new normal of pricing is what we should have been paying for the past few years and it's just catching up on us.'