Any analyst worth his salt, would base his or her analysis on a constant and disciplined analysis of numbers. They would not in anyway be swayed to change this due to any change in what the number indicate. This is because they would base their analysis on technical facts and not some hidden agenda. This is the cornerstone of this column.
On the 17th April, the full HICP inflation figures for March 2024 where published by Eurostat. Let us first of all set the scene of what these latest inflation numbers are telling us. As seen below, one can see that inflation is falling across Europe, including food inflation. I am saying this as seriousness demands that any analysis is based after presenting a real context, based on facts. We cannot be taken seriously if we argue that when inflation numbers are up, just like elsewhere in Europe, this is because of the “greediness” of local businessmen and when inflation numbers are down this is due to how great local policymakers are.
May I once again remind everyone, how in the past months some technical commentators had written that government intervention through the food price capping scheme was needed as from Q3 2023 onwards there was a divergence in food inflation in Malta when compared to the Euro Area Average, which meant that food importers & distributors where profiteering and hence government needed to intervene. Some even went all the way to say that this was due to a market failure as competitive forces where not working well enough.
Now with the March 2024 HICP statistics out, we can see how the divergence between overall Food prices in Malta and the Euro Area average has developed. As shown below the divergence experienced with regards the annual change in HICP for March 2024 (+4.4%) for All Food, is slightly higher than that experienced in February 2024 and above the divergence experienced from June 2023 to December 2023, with this divergence in March 2024 being only below that experienced in January 2024 (+5.7%)
However, the above is just an initial analysis which merits a deeper dive to really understand what is happening. To do so, let us first examine the divergence between the Euro Area Average and Malta with regards the Annual change in HICP for March 2024 with regards Processed Food (excluding Alcohol & Tobacco). As shown below you will see that the divergence in March 2024 (+3.4%) was above the level experienced from August 2023 to December 2023, with only January 2024 having a higher divergence of 4.1%, whilst this divergence stood at +3.5% in February 2024.
If we do the same and now examine the divergence between the Euro Area Average and Malta with regards the Annual change in HICP for March 2024 with regards Unprocessed Food, we see that the divergence in March 2024 (+4.0%) was above the divergence experienced from August 2023 to November 2023 and below the divergence experienced in December 2023 (+5.4%) and January 2024 (+6.5%). The divergence in February 2024 stood at +3.1%.
The above analysis seems to indicate that the major contributor for food price changes in March 2024 was unprocessed food, rather than processed food.
To have a more detailed look, below please find detailed figures for certain popular food categories, which compares the Euro Area Average and Malta’s Annual HICP rates from August 2023 to March 2024.
The above figures outline that for the vast majority the divergence between the Euro Area Average and Malta’s HICP annual rate of change per month has remained almost the same between August 2023 to March 2024, with the exception of Coffee, Frozen Vegetables, Preserved Milk, Eggs and Butter which had a reduction in divergence. However, the real big reduction in divergence was in Fresh Fruit, whilst the prices for Fresh vegetables kept falling.
When I see all the above graphs and figures, what really stands out is the divergence in food prices in Malta when compared to the Euro Area average, that really picked up pace in the last 3 months of 2023. The million-dollar question that remains unanswered, is what happened in the Maltese food market in Malta that suddenly led to a divergence in food prices in Malta when compared to the Euro Area Average? A divergence that was not seen before the end of 2023 and that basically remains standing in Q1 2024.