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Easter Shopping: Modest Price Increases Expected, But Watch Out for Shrinking Packages

COMMERCEEaster Shopping: Modest Price Increases Expected, But Watch Out for Shrinking Packages

The authors of the report titled “Index of Prices in Retail Stores” predict that the prices for basic shopping will rise on average by about 3% year-on-year (YoY) before the holidays. This increase is smaller than the one observed last year when the inflation peak rose above 20% YoY. The experts anticipate that the prices of food additives, sweets and desserts, as well as household chemicals, will increase the most. At the same time, they reassure that other product groups traditionally purchased for Easter will not significantly increase in price. However, consumers should watch out for reduced packaging or volumes but at “typical” prices. Specialists add that retail chains are unlikely to dare significant price increases before the holidays even though they have cause. Prices may slightly increase, but only after Easter when the VAT rate on some food items is unfrozen.

The report titled “Index of Prices in Retail Stores”, authored by UCE RESEARCH and WSB Merito Universities, showed that in February, the prices of basic products rose by an average of 3.9% YoY. The January increase reached 4.9% YoY, while December’s was at 5.6% YoY. The authors of the report believe that the downward trend will continue in March, and retail prices will rise by a maximum of about 3%. Monitoring from the first two weeks of March shows such a trend. However, it should be noted that there is still some time until the holidays, and the situation may slightly change.

“Last year, in the epicenter of inflation, the increase exceeded 20% YoY. Nothing dramatic should happen now. The only concern is the announcement of a return to routine VAT rate on some food items. It may encourage retailers to raise prices in March, then, at the beginning of April, successfully lower them and widely communicate that the prices are not rising in their stores, but rather decreasing. We’ve seen similar mechanisms during the introduction of zero VAT. Shops then artificially raised prices for a while, only to show later that they were making cuts by the tax rate. But the matter in this regard is not entirely decided,” claim analysts from UCE RESEARCH.

As Dr. Anna Motylska-Kuźma from Wroclaw University of Environmental and Life Sciences notes, the pre-holiday period is ideal for attempting to raise prices. However, experiences from last Christmas show that consumers, given the current price level, cannot accept such practices. Therefore, she does not expect significant increases in store prices before the holidays themselves.

“Easter period may slightly increase demand pressure, but not enough to impact noticeable price leaps. The dynamics of increases in YoY terms will remain at a level of slight growth,” says Dr. Tomasz Kopyściański from WSB Merito University in Wrocław. Analysts from UCE RESEARCH also add that the present “price war” among discount stores, where the majority of Poles shop, including for Easter, will aid this matter.

In February, of the 17 monitored categories, 10 showed single-digit YoY increases. Furthermore, double-digit increases applied to 2 groups of goods. There were also 5 decreases recorded. Dr. Kopyściański explains, “The number of categories showing single-digit YoY growth or even remaining in a downward trend can be higher in March. Despite the weak economic recovery, demand and cost pressures remain low in the conditions of weakened economic conditions.”

Last month, food additives (i.e. ketchups, mayonnaises, mustards, and spices) were on the front line of price increases, growing by 12.1% YoY. Dr. Anna Motylska-Kuźma reassures that the situation with vegetable prices should not cause concern. “The holidays are always a good opportunity to raise prices for products that are traditionally associated with this period of the year. However, I do not expect significant increases in vegetable prices. After very good harvests in the fall, there is still a lot of stock that needs to be liquidated before the new season.”

Dr. Tomasz Kopyściański also adds that while eggs are likely to see some price increase due to Easter shopping, he does not foresee significant price shocks for dairy products or meat. On the other hand, specialty products will likely remain more expensive due to their associated costs.

A few categories that are considered typical holiday items slightly decreased in price in February. They include fruit, dairy, alcoholic beverages and bulk products. Dr. Kopyściański does not foresee major price shocks for these categories, while Dr. Anna Motylska-Kuźma assures that coffee prices, which have been hitting consecutive records in global markets, have to translate into increased costs in Polish shops.

Finally, fat products recorded the most significant price drop in February, down by 16.7%. Given the very good rapeseed and sunflower harvests last year, Dr. Motylska-Kuźma does not expect price increases for these products, despite the Easter season.

Source: UCE RESEARCH, WSB Merito

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