Inflation in supermarkets to peak this summer at the earliest, economists say

Groceries in the supermarket, and activities like dinner at a restaurant or going on vacation will likely continue to become more expensive in the coming months. Economists from ING and ABN Amro tell ANP that it will take at least until the middle of this year before inflation on food products will reach its peak. "And for services like hotels and restaurants, it will probably only happen later on, because their prices are mainly driven by wages," says ING economist Marcel Klok.

Jan-Paul van de Kerke from ABN Amro notes that consumers are still spending a great deal of money, despite the fact that many products already increased substantially in price last year. He believes this is due to government energy aid measures but also to the robust labor market. "If you have a secure job, you also tend to spend more," he says.

New data from Statistics Netherlands (CBS) released on Thursday show that the annual inflation rate rose again in February, after it had slowed down in January. Economists believe this is mainly because manufacturers delayed passing on price increases caused by increasing energy prices and more expensive raw materials. Energy prices are now somewhat lower than a year ago, partly thanks to the government’s energy price cap.

Klok explains that supermarket price increases ​have long been limited because shelf prices are often subject to a contractual agreement with manufacturers for extended periods of time. Energy prices are not only coming down now, but also raw material prices are falling worldwide, while prices in Dutch supermarkets keep on rising.

For the time being, both economists are sticking to their earlier predictions concerning inflation throughout the year. Due to the depressing effect of energy prices and the expectation that the inflation peak for groceries and services will be reached at some point, they expect a substantial decline in annual inflation compared to last year. "Last year inflation was around 10 percent. This year it will probably be 4 or 4.5 percent. Definitely lower, although that means inflation still remains quite high," Klok points out.

Van de Kerke adds that these projections are still subject to considerable uncertainty. This uncertainty, he says, also affects entrepreneurs. "Many businesses are reluctant to pass on price decreases in raw materials, if there are any, to consumers because they don't know what might happen to them in the future.”