inflation italy food prices recession economy

The new government will have to deal with a strong acceleration of inflation in Italy. In October, the growth rate of consumer prices was close to +12% compared to a year ago. A level not seen since 1984.

According to initial inflation estimates, the national consumer price index for the community as a whole (NIC), excluding tobacco, rose by + 3.5% monthly and by + 11, 9% at an annual rate in October (from +8.9% the previous month). “We have to go back to March 1984 for an evolution of the general NIC index equal to + 11.9%” comments Istat. “The strong acceleration is mainly due to the prices of energy goods (from +44.5% in September to +73.2%) and, to a lesser extent, to the prices of food products (from +11.4% to +13 .1%).”

Photo Ansa / Epa Adam Vaughan

Furthermore, according to estimates, the prices of food, household and hygiene products rose from +10.9% to +12.7%. Those of frequently purchased products from +8.4% to +8.9%. Inflation is also progressing with regard to the prices of food goods (from +11.4% to +13.1%), both processed (from +11.4% to +13.4%) and unprocessed (from +11.0% to +12.9%). “You have to go back to June 1983 (when they recorded a trend variation of +13.0%) to find a growth in the prices of the ‘basket’, on an annual basis, higher than that of October”, comments Istat.

Inflation and interest rates

The Italian inflation data comes in the hours when the European Central Bank raised interest rates by +0.75 points. The prime rate increases to 2%, the deposit rate to 1.5% and the marginal lending rate to 2.25%. All this means that the costs of loans and mortgage payments are increasing, for example. According to ECB President Christine Lagarde, the eurozone economy is expected to weaken further in the latter part of this year. But even at the start of 2023. According to Lagarde, the labor market “continues to do well” but the drop in activity could lead to “an increase in unemployment” in the future. Basically, Europe, and with it Italy, is heading towards a period of recession.

ECB President Christine Lagarde. Photo Ansa / Epa Ronald Wittek

As far as our country is concerned, beyond inflation, the national economy will grow, for 2022, by +3.2%, or 0.2 percentage point more than the July estimates. But in a few weeks, with the start of the new year, we will enter a period of a sharp decline in growth, that is, a recession. In the first half of October, the International Monetary Fund (IMF) revised the growth of the Italian economy until the end of 2022. After + 6.6% in 2021, GDP (Gross Domestic Product) is expected to increase this year by +3.2%. %. For 2023, on the other hand, the IMF lowered its forecast by 0.9 percentage points (-1.9 points in April), estimating a contraction of 0.2% of our economy.

The headquarters of the ECB in Frankfurt. Photo Ansa / Epa Ronald Wittek