A few weeks ago I came across a tweet from a Spaniard in Sweden who said he was surprised by the “incredibly rapid price increase in Europe”. This was, as he himself admitted, a bit misleading: in Sweden these products were not as common as in Spain. That’s when I remembered Jack Monroe.

This British journalist became the protagonist of a controversy by saying that the prices of cheap products were increasing faster than other products in 2022. This created a huge dust-up, causing the authorities to change the methodology and shortly afterwards the Government said that this was not the case.

But now we know Monroe was right.

Welcome to ‘cheap inflation’. Recent research by Alberto Cavallo and Oleksiy Kryvtsov examined this skepticism across several advanced economies between 2018 and 2024. Are prices really rising faster for cheaper products than for more expensive ones? To find out, they collected microdata from 10 Western countries and classified products by price range.

The results present an interesting panorama, yes; but above all, I am worried. “While all price categories grew similarly until mid-2021, from 2022 onwards “cheap foods started to grow at a much higher rate than premium products”, they explained.

What does it mean? What is important is that between 2019 and 2024, the prices of cheap products in Spain increased by 37%, while the most expensive ones increased by only 23%. Cavallo and Kryvtsov’s overall assessment shows that this is not a phenomenon specific to Spain. On the contrary, it affects almost all the countries studied.

Of course, Spain was the place where expensive or cheap products grew the most. In fact, the country is where most of the products are grown prize (together with the Netherlands) and where the cheapest ones grow the most (already alone).

But why? That’s the question Ángel Martínez and Isabel González ask themselves at El Mundo. Unfortunately, Spanish data is of little use. At least, what is generally available. We don’t have the microdata to know “exactly what types of products have seen their prices increase and whether they are concentrated in specific areas, establishments or, as we see in the case of food, in price categories.”

What does seem clear is that “the strong inflation of the last three years and the slow recovery of power enjoyed by most households” may have played a big role in this. After all, the two main explanatory mechanisms used by Cavallo and Kryvtsov are important here: on the one hand, “products tend to be more affected by supply chain problems” and, on the other hand, “households tend to stimulate consumption of the cheapest goods, which puts upward pressure on their demand and, consequently, their prices.”

Either way, the x-rays are terrible. In this context, it is not unusual to find (always according to Martínez and González) “a significant percentage of consumers who continue to feel that their purchasing power is still below the normal level, even if the majority have regained their purchasing power on paper”. Moreover, this percentage is concentrated in the most socioeconomically vulnerable levels.

Image | Eduardo Soares

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