Inflation in Belgium: Lowest Level Since Ukraine War with Significant Drop in Energy Prices

2023-08-01 15:22:54

August 01, 2023 Today at 5:55 PM

Updated at 01 August 2023 17:55

Inflation in Belgium has reached its lowest level since the war in Ukraine, given the drop in energy prices. But food inflation remains spectacular.

Au second trimesterheadline inflation was 2,6% on average in Belgium, according to the Price Observatory of the FPS Economy. This is the lowest level since the start of the war in Ukraine, comparable to that observed in the second quarter of 2021.

Since then, inflation had increased every quarter, before starting to down to 5.9% in the first quarter of this year.

The main reason for the slowdown in inflation in recent months is the significant drop in energy prices, explains the FPS Economy. After rising 57.9% in 2022, they have fallen this year. Year-on-year, the change is – 32% in the second quarterfollowing a sharp drop in gas and electricity prices and, to a lesser extent, liquid fuels and motor fuels.

Inflation remains positive for all other product groups. She reached 14.2% for food products et 6.5% for industrial goods in the second trimester. And the inflation of services continues to progress to reach 6.5% in the second quarterdue in particular to the automatic indexation of salaries.

2,6%

In the second quarter of 2023, headline inflation was 2.6% in Belgium, a level comparable to that observed in the second quarter of 2021.

Flambée of milk, cheese and eggs

On the food side, the increase is particularly significant for milk, cheese and eggs (+23.5%) et vegetables (+21.5%). An increase which is largely due to strong commodity price increases et producer prices of industry, indicates the FPS Economy. And in the case of vegetables, the 2022 drought also played a role.

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Food inflation was higher in Belgium than in the neighboring countries in the second trimester, but differences remain relatively small. In the Netherlands, food inflation is 12.9%, in Germany it is 13.9%, and in France 13.8%.

L’core inflationwhich does not take into account unprocessed food products and energy products, is therefore still 8.1% in the second quartera little less than the 8.4% of the first quarter.

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Inflation stagnated in Belgium in July following the upturn in energy prices

Higher in neighboring countries

Germany, France and the Netherlands experienced a comparable development, with inflation rising sharply from mid-2021, reaching a peak in the fourth quarter of 2022.

As in Belgium, inflation started to fall in the first quarter, reaching in the second quarter 6.9% in Germany et 6.3% in the Netherlandshigher levels than in Belgium.

Core inflation, which does not take into account unprocessed products and energy products, was still 8.1% in the second quarter.

In Franceinflation remained stable in the first quarter, before falling slightly to 6.1% in the second quarter. The differences are mainly explained by inflation differences on energy: price variations have a greater impact in Belgium, both upwards and downwards, due in particular to the importance of variable contracts in gas and in electricity.

The index on which the Price Observatory works is a harmonized index, to allow comparisons between countries. Its results are, in recent months, significantly lower than those of Statbel. “This is mainly due to the fact that Statbel’s CPI index takes into account a 12-month weighted average for the price of heating oil, while our HICP index takes current prices, which have fallen, and the fact that gas, also in sharp decline, weighs more heavily in our basket than in that of Statbel” explains the Price Observatory.

The summary

Au second trimesterheadline inflation was 2,6% on average in Belgium, according to the Price Observatory of the FPS Economy. A low since the start of the war in Ukraine. The main reason for the slowdown in inflation in recent months is the significant drop in energy prices.But inflation still reaches 14.2% for food productsan increase mainly due to strong commodity price increases et producer prices Of the industry.

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