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Retail Prices Expected to Rise Moderately in Q1, But Easter and VAT Hike Could Fuel Further Increases

COMMERCERetail Prices Expected to Rise Moderately in Q1, But Easter and VAT Hike Could Fuel Further Increases

The first quarter in retail stores is expected to be relatively stable. Year on year Prices will rise by an average of 6-8 percent.

The level of price inflation in stores in Q1 this year will mainly be determined by the actions of the new government and producers’ reactions to the current situation, including the increase in minimum wage. The cost of daily shopping will also naturally depend on commodity prices, energy, oil, and gas. If nothing shakes up the market and inflation maintains its downward trend, food and drinks should increase in price by about 6-8% year on year. The largest price jump will likely occur in March, affecting food additives, bread, meat and dairy. This will be tied to the upcoming Easter. However, consumers shouldn’t be greatly shocked just yet. Price rises could flood store shelves after the zero VAT is withdrawn at the start of Q2. By then, average increases could reach even 10% year on year.

Q1 prices in stores will mainly depend on the behavior of manufacturers and the actions of the new government. Manufacturers will closely watch their situation and analyze it in the long term, with decisions about potential price increases likely taken around end of March. If they don’t need to introduce them, they will avoid doing so to not upset customers, especially since they increased their prices last year. If the rise in minimum wage, commodity prices or weather troubles don’t negatively impact the situation of manufacturers, this period should be relatively stable.

Prices will keep rising, but certainly slower than last year. Unfortunately, there’s no talk of decreases year on year – apart from certain exceptions. Neither producers nor the trade industry experienced anything that could lower their current operational costs. And it currently doesn’t look like this scenario will be possible this year. Factors influencing the rising costs of everyday shopping could be numerous, including price increases of commodities used for production, components and semi products, as well as energy, oil and gas. Strengthening of the Polish Złoty should also be mentioned. Moreover, after the first minimum wage rise in January, entrepreneurs should already prepare for the next one, planned for the second half of the year.

How much prices will rise will also depend on multiple factors. Assuming inflation maintains its downward trend and nothing suddenly shakes up the market, food and drinks could increase in price in Q1 by about 6-8% year on year. The biggest price increases should occur at the end of March, tied to the upcoming Easter holiday. This will mainly affect food additives (like mayonnaise, ketchup, mustard), bread, meats and dairy. This could also affect household chemicals, vegetables and animal fats.

It’s worth reminding that in recent periods last year, food additives, household chemicals and bread were the categories that saw the biggest price increases, according to the cyclical report titled “RETAIL PRICE INDEX” by UCE RESEARCH and Merito WSB University. On the other hand, fat products were in the negative. Though they’ll probably experience a smaller decrease year on year. Among them, we notably have margarine and butter, necessary products for preparing holiday specials.

We should also keep in mind that the zero VAT rate was maintained until the end of Q1 for some food products. When it stops being in force, prices will have to go up by at least the value resulting from this tax. Any additional costs and burdens will be passed on to consumers, as always. Then, average increases could reach even 10% year on year.

Commentary author: Robert Biegaj, retail market expert from the Offerista Group

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