Bank of Italy warns: “Inflation attacks the poor, +18% their shopping cart”

The major burden of inflation rests on the shoulders of the poor. The weaker bands recorded one price hike by 17.9% last year. The richest part of Italy by 9.9%. The analysis by the Bank of Italy confirms the increase in inequality between the less affluent and the wealthy. The former have suffered more from the burden of price increases by virtue of a less diversified basket. The latter have better preserved their purchasing power.

A two-speed Italy is what emerges from the latest annual report of the Bank of Italy. With i increasingly poor poor and with the wealthiest bands running at almost double the pace. If it is true that household income has increased on average, it is equally true that inflation has eroded it. Until it resets. As the economists of Via Nazionale point out, the energy crisis and the price spiral weighed on the poorest: «The annual inflation rate for those households was 5.3 per cent in December 2021 and 17.9 per cent in the same period of 2022, against 3.5 per cent and 9.9 per cent for households belonging to the highest fifth in spending». And, on balance, “high inflation and sharp declines in asset prices” have reduced the net financial wealth of Italian households of 693 billion euros in 2022. With a greater incidence for those who struggle to make ends meet.

The result is that household spending, unchanged at 4.6%, has weighed heavily on those who have no possibility of substituting goods or services. Based on the basket of purchases, which according to Istat has a less elastic demand for those who are less well-off than those with more spending power, it is the poorest who lose out. The problem, as the Bank of Italy points out, is that from last summer until the end of 2022 inflation moved from the energy component to manufacturing and finally to services. It is no coincidence that the report points out that the post-pandemic desire for leisure has been reflected “in particular in spending on hotels and restaurants which has risen by about a quarter, while remaining more than 10% lower than pre-covid levels”. A factor that becomes inflammatory if it is combined with the stagnation of wages, especially in the poorest segment.

It’s no better on the wage front. The most marked increase in average income from work in the first fifth (i.e. the most fragile segment of the population, ed.) “is mainly due to the greater increase in the number of employed people in the poorest nuclei (in which the average number of income recipients has from 1.12 to 1.23 between 2018 and 2021, while it remained constant at 1.13 in the richest families), favored by the recovery of the labor market after the pandemic”. In other words, more poor people have found work. But at the same time, the Bank of Italy points out, wages and hours worked “did not grow in the same period”.

On the basis of this, significant evidence comes from Palazzo Koch. “Without the salary contribution of individuals who were not employed in 2018 but who started working in subsequent years, the real earned incomes of the poorest households would have fallen by 1.3 per cent in 2021, similarly to those of the wealthiest households. , the analysts of Via Nazionale point out. Who put pen to paper an element that was already known to those who have to make ends meet month after month.

In view of the summer, precisely in the light of these dynamics, the central bankers’ concerns for the countries with the highest tourist vocation. Including Italy. Which could register more persistent core inflation than estimates. The increase in price lists is now “no longer understandable” and a moment of discussion with the producers would be useful to investigate the causes of the inflationary tension which is slowing down but does not give way, he underlines George Santambrogio, vice president of Federdistribuzione. The risk, also hinted at by the Bank of Italy, is that the usual ones pay the highest price. That is, the less well-off.