Data pointing to protracted cost-of-living crisis is mounting


Any last hope the Greek authorities had that the economic and political impact from the energy crisis would be manageable has faded as sentiment and hard data tell a different story that has contributed to New Democracy experiencing a steady decline in opinion polls although retaining a significant lead over SYRIZA.

The cost-of-living crisis has become the most dominant concern for Greeks over the last few months, with the majority expecting the situation to get worse. Also, the public is split over the support package provided by the Greek government. Six in 10 voters do not see the measures as sufficient to relieve households from the inflation burden.

This is also reflected in the latest sentiment indicators. An upward trend in economic sentiment has been reversed since January. There was a sizable drop of more than 7 points in April.

Consumer confidence continues to deteriorate, falling by another 3.9 points in April to -55.3 points, from -21.9 points in May last year.

The CPI released by ELSTAT this week climbed to 10.2 pct, breaking records each month. It is currently at the highest growth rate since the mid-1990s.

The effect of the energy crisis on prices is reflected across goods. Electricity was up 88.8 percent annually and natural gas shot up by 122.6 percent. Heating oil also moved strongly with a rise of 65.1 percent.

In April, the annual CPI movement was led by a 10.9 percent increase in food and non-alcoholic beverages, a 35.2 percent rise in housing mainly due to rents, electricity, natural gas and heating oil, and a 15.4 percent surge in transport due to fuels, cars, and air and sea tickets.

There was also a 1.6 percent increase in clothing and footwear, 4.2 percent in household equipment, 3.8 percent price expansion in hotels-cafes-restaurants and 0.9 percent rise in education.

According to the latest living conditions report from ELSTAT, for 2020, food now takes over 23 pct of the allocation on the average monthly expenditure of households.

The same allocation in 2009 was 17.3 pct. Housing spending stood at 15.3 pct of the allocation, while transport was 12.3 pct.

With those main needs taking up more than 50 pct of Greek household spending, the impact of inflation is tangible and is eroding social confidence.

A recent survey by GPO found that an overwhelming 70.5 pct was dissatisfied even with the 50-euro monthly rise in the minimum wage that was introduced on May 1.

The latest industrial production data for February shows that production was dominated by electricity supply, increasing annually by 26.8 pct, while manufacturing contracted month-on-month.

Trade and balance of payments data also highlights the challenging landscape. In the first quarter of the year, the trade deficit has grown by close to 79 pct, and even if oil products are excluded the deficit is up by 48 pct.

The current account deficit in January and February was 4.12 billion euros, from 1.19 billion euros in the same period last year. The oil deficit has increased almost fivefold, from 449.5 million in the first two months of 2021 to 2.26 billion euros this year.

It is only a matter of time before the uncertainty is reflected in spending and investment decisions, although the funds from the RRF are expected to offset some of those effects.

In the latest stability programme, submitted to Brussels last week, private consumption is still expected to increase by 2.4 pct and investment spending to rise by 9.8 pct even though GDP growth has been revised down to 3.1 pct.