Fruit and fresh 11% more expensive. Six months of war empties the pockets of the Portuguese

Dinheiro Vivo examined how the prices of more than a hundred items (goods and services) in the reference basket used by the National Institute of Statistics (INE) to calculate inflation at the end consumer have changed. Between January and July, the range of differences is large. In Portugal, headline inflation for this period is around 7%. Excluding food and energy, everything is 5% more expensive. But for unprocessed foods, purchasing power is severely affected, with inflation exceeding 11% in these seven months. In energy products it is more than double, to 24%.

The war in Ukraine contributed to a resource constraint situation that worsened in 2021, raising the cost of food, semiconductors, electronic components and oil.

This war and the sanctions against Russia (and Russia in retaliation), one of Europe’s largest suppliers of gas and oil, triggered another energy shock, with the cost of these raw materials reaching new highs and triggering a purchasing power crisis in Europe. especially among the poorest and most disadvantaged population groups. Many businesses have also been left between a rock and a hard spot due to the sudden and violent rise in energy costs.

European governments have been forced to support families and businesses with, among other things, packages of tax measures and direct subsidies. [ver exemplos na caixa ao lado].

But given the gravity of the situation, the unstoppable rise in inflation and the duration of the conflict, more plans will have to be implemented, namely energy conservation. The Portuguese plan will be announced at the end of this month.

Between January and July, the range of price differences is large. In Portugal, headline inflation for the first seven months of the year is around 7%. Excluding food and energy, everything is 5% more expensive.

What has become more expensive?

In Portugal, air transport is the leader in inflation, rising by more than 81% between January and July. Tourist accommodation services also consume energy, but it was very high demand that helped drive up prices. According to calculations by Dinheiro Vivo, based on INE data, the increase in the period under study (from the beginning of the year to July) is more than 61%.
Passenger transport by boat or ship (sea or river) followed the same pace (61% more expensive now).

As expected, one of the most important items in the Portuguese consumer basket (fuels for transport vehicles) rose by 20%. The aggravation would have been much greater without the dampening measures proposed by the government in March and April, such as the temporary cut in the ISP for petrol and diesel.

In tourism, package holidays (including transport and accommodation costs) are also much more expensive. They recorded the fourth highest inflation rate measured between January and July, up 36%.
Electricity and gas bills also rose by 29% and 23% respectively.

Ukraine was one of the main suppliers of grains and oilseeds. The interruption of exports to Europe caused the price of food “oils and fats” to skyrocket: they are currently 30% more expensive.
The cost of bread was dragged down by this inflationary environment. It registers one of the biggest increases yet: almost 12% more expensive in just seven months.

At the top of the goods that became more expensive, other staple foods appear. Meat is now 15% more expensive than in January. Fruit costs 12% more. The trio of “milk, cheese and eggs” saw its price rise by 11%. The fish registers an inflation rate of almost 9%.

what is cheaper?

Because it is not the majority, some products are cheaper in July than in January. Medical services are leading the way, with an average price drop of 15%. Hospital services then come with a 10% drop in the final price.
Buying a computer is 3.5% cheaper. Phones, mobiles and cameras are registering negative inflation of almost 2%.
Gambling and betting can also be more inviting: they are almost 3% cheaper.

The items “higher education”, “combined passenger transport”, “water supply” and “insurance related to housing” are almost identical. They haven’t blamed the high inflation yet.

Economy shows signs of weakness

After a brilliant first quarter, strongly fueled by tourism and services, the Portuguese economy started to show some signs of fatigue in the second quarter, after even declining slightly from the start of the year.
According to another study by Dinheiro Vivo, there are clear signs that the state of grace of the recovery will have ended in some parts of the economy.

The INE’s economic activity indicator is declining, the backlog of external orders for Portuguese industry is not coming out of the red, job creation is noticeably slowing down and the number of new unemployed people registered in the IEFP centers is growing since April after months of refuge.
In the opposite direction, the investment indicator continues to rise, overnight stays in hotels and similar rooms are growing at triple digit rates and construction and services activity continues at a solid pace through June.

The INE activity indicator is declining, the backlog of external orders for Portuguese industry is not coming out of the red and job creation is slowing noticeably.

government measures

Like its European counterparts, the government led by António Costa has taken steps to minimize the sudden impact of inflation on households and businesses. A package of “18 measures” was announced in April. “In order to keep energy prices in check, the government approved the reduction in the tax on petroleum products, equivalent to the reduction in the value-added tax to 13%, which amounts to minus 0.215 cents per liter of diesel and minus 0.207 cents per liter of gasoline.”

Mechanisms were also put in place in cooperation with Spain “to limit the impact of the increase in gas prices on electricity costs, by providing for a reduction in energy costs of €690 million, by limiting the unexpected profits of electricity companies”.

The increase in the carbon tax was suspended “until June – which is less than 5 cents per liter – and the quarterly reassessment until the end of the year”.
Other mitigation measures announced were “the creation of professional gas to supply freight transport; the flexibility of tax payments and deferral of social security contributions for the most vulnerable sectors; the subsidy to support the increase in gas costs of intensive energy companies.” and the 30 cents per liter discount on social sector fuel.

For agriculture and fisheries, the cabinet has made progress with the “temporary VAT exemption on fertilizers and animal feeds and temporary reduction of the ISP on agricultural diesel until the end of the year”.

For the poorest families, the Executive announced the extension of “measures to support the price of the food basket (60 euros) to all families with minimal social benefits, the same is happening with the support of 10 euros for the purchase of gas cylinders”.

More recently, as part of measures against the new crisis, the prime minister has reinstated and increased the oldest promise regarding free childcare. It says it will come into effect “on September 1st.” “It is a gradual process, which this year will apply universally to all children born since September 1, 2021. Next year it will be extended to children in 1st and 2nd grade and finally, in 2023/2024, to all children who go to childcare centers,” said António Costa.

Measures taken by Spain, Germany and France


. A new plan to respond to the impact of the war on the economy and prices could reach nine billion euros by the end of the year.
. Reduce VAT on electricity to 5%.
. Extra support of 200 euros for the unemployed and employees with lower incomes.
. Increase of non-contributory old age and disability pensions by 15%, the lowest.
. 50% discount on public transport tickets supervised by the central state and 30% on transport supervised by regional governments.

This new package, which came into effect in July, comes on top of the €6 billion plan for an initial response to the energy crisis.

Previously there were direct discounts on fuel costs, a 15% increase in the minimum income, limits on rent increases and the elimination or temporary reduction of certain elements of the electricity tax.


. New package of ten billion euros in tax relief with an impact on collection in 2023.
. Increase in the exempt income base. Tax-free annual income up to 10,347 euros in 2022, exempt value increases to 10,632 euros in 2023 and to 10,932 euros in 2024.
. 42% tax rate on the highest earners with the shortest range, ie the richest also get tax relief. The maximum rate applies to income above € 58,597 in 2022, above € 61,972 in 2023 and above € 63,515 in 2024.
. More benefits for people with small children.

Before this package, Berlin had already submitted a €30 billion plan against inflation.

Save on ISP, national/federal pass from just 9 euros per month between June and August for use on public transport throughout Germany.


. New package of measures worth € 20 billion.
. Fuel subsidy for those who use the car for work. Support 12 cents per liter in October and 6 cents in November. The support will disappear in December.
. Grant of 100 euros for students.
. 3.5% increase in civil servants.
. Electricity bills will rise to 4% in 2022.
. Meals for 1 euro in public school canteens for poorer scholarship students.
. Nationalization of EDF (the national electricity company), the cost of which will be approximately 12.7 billion euros. The goal is to achieve energy sovereignty, the government says.

Before this package, France had already advanced with a support plan worth 25 billion euros.

Food voucher of 100 euros for the poorest, with an increase of 50 euros per child.

Anticipation of updating pensions and social support by 4%.

Luís Reis Ribeiro is a journalist for Dinheiro Vivo

Author: Luis Reis Ribeiro

Source: El heraldo