From food shopping to travel, why don’t prices go down after price increases? – Corriere.it

From groceries to drinks at the bar or restaurant, from the hotel to the plane flight: everything costs more. The prices of raw materials and energy have fallen, yet those of the shopping cart and many other items remain high. According to a survey by Altroconsumo, which analyzed the prices of 10 foods that are often present in Italians’ shopping carts, today on average 9% more is spent to buy them than a year ago and 30% more than two years ago. Years ago. While air fares from Italy have risen on average by 47.5% (+52% in June), according to an analysis of the Corriere della Sera.

Inflation and bad weather

There are several reasons why prices struggle to fall. Let’s start with the shopping cart: if in a very early phase of rising inflation, due to high energy prices and the war in Ukraine, the food industry and large-scale distribution had managed to absorb costs, then they no longer have it made and started downloading them to the final consumer. As energy prices cooled, food inflation became the main culprit for price increases partly as a result of this delay in passing costs downstream, partly due to other complications that have added over the months following, such as the bad weather that hit some Italian regions. The floods in Emilia-Romagna, which devastated entire crops, led to a 20-30% surge in the costs of many fruit and vegetables. Second to making inflation lasting would also be the potential household demand surplus, generated after the pandemic, which continues to fuel the consumption of services, trade and tourism, allowing companies to pass costs downstream.

The pursuit of profit

But the suspicion is growing that there is something else behind this generalized surge in prices which then struggle to fall, namely the pursuit of profit by some companies. Economists from Allianz Trade, the German credit insurance group that has analyzed company profits, sector by sector, to understand the effects of inflation, estimate that about 10-20% of food inflation in Europe can be attributed to profit. In this sector, according to the study, retailers were able to increase their margins to 78.6% in the fourth quarter of 2022. Faced with this situation, as Daniele Manca points out in his editorial for the Corriere della Serait is natural to wonder if something is being done in terms of controls.

Why don’t the flight prices drop?

Among the costs that show no sign of decreasing is that of air fares, despite the reduction in the cost of kerosene. How do you explain? There are those who maintain – among insiders – that today the airlines are using fuel purchased in part in 2022 when prices had doubled (even reaching 1,500 dollars per ton) and that therefore any drop in tariffs expected for the year next. In reality this will only happen if the macroeconomic indicators push people not to fly as they do now and therefore force the companies to make airplane seats more attractive by reducing the price. Other factors are currently contributing to the increase in airline tickets: the war in Ukraine forces Europe-Asia flights to take a longer route and therefore consume more, then there are upwardly renegotiated employment contracts, therefore a certain difficulty of the aviation industry to procure aircraft and spare parts on time. In general, about 93 seats are offered for 100 passengers and therefore the ticket goes up. In Europe, then, it will be necessary to take into account the environmental policies which from 2027 will lead companies to have to pay for each ton of carbon dioxide emitted and to have to use increasing quotas of sustainable fuel for aviation (Saf) which today costs even 5-6 times the classic kerosene.