Food prices are rising

The Luxembourg statistics office STATEC has once again announced that food prices have risen. From last October to this growth was 11% (excluding alcohol prices).

Food prices are rising

From September to October, prices rose by 1.7%. This is a record of the last 15 years — since October 2007. Fresh vegetables (+5%), bread and cereals (+2.7%), and dairy products (+1.9%) went up in price the most.

The records of the year are as follows: dairy products (including eggs) became more expensive by 13%, vegetables — by 13%, meat by 12%, bread and cereals by 12%.

STATEC suggests that prices may slow down in 2023. The trend is already set. Frozen seafood (-5.3%) and olive oil (-1.6%) fell in price in October compared to September.

It should be noted that, on average, in the Eurozone, food prices rise faster than in the Grand Duchy. Growth for the year reaches a record 15%. Food accounts for almost a quarter of EU-wide inflation, which is 11%. This is a significant increase compared to March 2022. Back then, food accounted for only a tenth of inflation.

Growing food prices and reducing VAT

As food becomes more expensive, the Luxembourg Consumer Protection Association (ULC) has criticized the retention of VAT on food. The Solidarity Package 2.0, signed at the beginning of October, covers only the regular rate (17%), the intermediate rate (14%) and the reduced rate (8%). The ultra-low rate (3%), which products are taxed with, will remain the same.

However, VAT reduction is not very effective against inflation. The budget will spend 317 million euros on it, or almost 500 euros per capita. And most buyers will not even notice the difference — significant amounts can only be saved on large purchases.

Niko Hoffmann, president of ULC, argues that VAT cuts don’t have to be visible to help. And Niko suggests helping people with low and middle incomes in a different way: adapt tax scales to inflation or carry out a tax reform.

Measures taken by the tripartite commission should boost real household income and private consumption by almost 1.5% in 2023, according to Statec. Whether it will work or not is too early to guess, the situation is too unpredictable.