Actual-time meals value inflation in Germany

Following Russia’s invasion of Ukraine on 24 February 2022 and subsequent sanctions in opposition to Russia, international financial prospects have worsened considerably and power and meals costs have elevated sharply worldwide (IMF 2022). In Germany, inflation as measured by the Harmonised Index of Client Costs (HICP) rose shortly to 7.6% in March and elevated to even greater ranges within the following months, to a magnitude final seen within the Fifties in Germany. In addition to power, non-energy uncooked supplies from Ukraine and Russia equivalent to wheat and corn, in addition to intermediate items equivalent to fertiliser, additionally play a significant position for the German meals sector. Customers haven’t solely adjusted their inflation expectations upwards (Afunts et al. 2022), however they’re additionally dealing with elevated uncertainty (Anayi et al. 2022), presumably giving rise to stockpiling behaviour.

The present episode exhibits that inflationary waves can unfold extraordinarily shortly, making dependable real-time details about inflation dynamics of utmost significance for central bankers and different policymakers. Nonetheless, official inflation statistics can be found solely at a month-to-month frequency and with a sure time lag. For instance, the headline flash estimate of the German HICP is revealed on the finish of the reporting month, whereas remaining figures for extra disaggregate merchandise are launched solely in the midst of the following month. Beginning with Cavallo and Rigobon (2016), the literature has more and more identified the usefulness of high-frequency value indicators based mostly on ‘webscraping’ or scanner information to supply a extra well timed inflation measure nearly in actual time. 

On this column, we use weekly retail scanner information from the GfK family panel to analyse each costs and portions of meals merchandise in Germany within the aftermath of the Russian invasion of Ukraine. This dataset has the benefit {that a} detailed breakdown of the inflation charge is already accessible two days after the tip of every week which is sort of six weeks earlier than the publication of the official HICP parts. As well as, the dataset accommodates transactions together with the quantity of gross sales per merchandise. Each items of data are very helpful in instances of disaster which might be typically marked by vital modifications in consumption patterns. This has been proven by Cavallo (2020) for the Covid-19 interval, whereas Cavallo and Kryvtsov (2022) counsel that product shortages can have non-negligible inflationary results within the brief run.  In our corresponding paper (Beck et al. 2022), we additionally doc good nowcasting properties of our high-frequency disaggregate information, just like different research (Modugno 2013, Harchaoui and Janssen 2018, Aparicio and Bertolotto 2020, Joseph et al. 2021), though an in depth exposition of those outcomes goes past the scope of this column.¹

Heterogeneous gross sales and value results following Russia’s invasion

We analyse the developments in costs and portions in mild of the Russian invasion of Ukraine for six staple meals merchandise (sunflower oil, flour, butter, low fats milk, bread, and low pods). Though these merchandise make up just one.7% of the German headline inflation, they’re an vital driver of customers’ frequent out-of-pocket purchases that once more strongly have an effect on customers’ inflation expectations. Furthermore, growing costs of sunflower oil and flour have been mentioned fairly prominently within the context of provide chain disruptions and commerce embargoes. Since Ukraine accounts for 75% of worldwide traded sunflower oil (McGuirk and Burke 2022) and, mixed with Russia, each provide over 1 / 4 of worldwide wheat exports, the battle has severely disrupted the provision of those staples whereas growing export restrictions have magnified the surge in meals costs (Espitia et al. 2022, Artuc et al. 2022). Our weekly value and amount indicators cowl the interval of January 2019 till the primary week of June 2022 (179 weeks in complete).

Our scanner-based indices sign a really robust enhance in costs for sunflower oil and flour in mild of the battle, accompanied by quickly greater gross sales. Determine 1 plots the weekly value and amount indices for every of the talked about meals merchandise. It compares trajectories in 2022 (crimson and orange stable strains) with their historic common from 2019 to 2021 (blue and purple stable strains) together with historic minimal and most values (shaded areas). In line with this, the worth enhance of sunflower oil was relatively gradual and already began as of early February. In distinction, costs for flour elevated very sharply, however solely greater than two months after the beginning of the invasion. In each circumstances, nonetheless, gross sales went far past their common ranges signalling elevated demand and presumably stockpiling behaviour.² The rise in gross sales for flour even surpassed the very excessive ranges noticed throughout the first Covid-19 lockdown in March 2020, as mirrored by the higher vary of the shaded space. In regards to the more moderen interval as much as June 2022, costs for each merchandise appeared to have stabilised at a really excessive stage, whereas portions have transformed again to their common stage.

Determine 1 Rising costs and rising portions

Sources: GfK family panel, personal calculations.
Observe: The determine exhibits weekly developments of value (left panel) and amount (proper panel) indices (Jevons fixed-base, 1st week of January=100) based mostly on GfK family scanner information for chosen meals merchandise in Germany.

In distinction, different staple merchandise equivalent to milk, bread, and low exhibited above-average value will increase whereas their gross sales remained relatively unaffected. As of early June, costs for low fats milk have been growing by 3%, for espresso pods by 8%, and for rye bread by 9% because the Russian invasion (see Determine 2). The corresponding amount indices don’t sign robust above-average will increase. Butter is barely completely different since portions additionally didn’t exceed common ranges however truly dropped beneath their earlier minimal on the finish of April, presumably as a response to a sudden spike in its costs. The most recent figures for June sign that costs have stabilised at a really excessive stage. Gross sales additionally went again to their historic common for milk and butter, however not too long ago peaked once more for espresso and bread.

Determine 2 Rising costs and steady portions

Sources: GfK family panel, personal calculations.
Observe: The determine exhibits weekly developments of value (left panel) and amount (proper panel) indices (Jevons fixed-base, 1st week of January=100) based mostly on GfK family scanner information for chosen meals merchandise in Germany.

Conclusion

On this column, now we have illustrated the behaviour of costs and gross sales of chosen meals classes in Germany in mild of the Russian invasion of Ukraine, exhibiting that value will increase have been broad-based whereas the response in gross sales has been very heterogeneous. We imagine that highlighting and understanding value dynamics of very particular items is vital since customers typically base their inflation expectations on each day procuring experiences. In our corresponding paper (Beck et al. 2022), we additionally present that high-frequency scanner information carry real-time predictive info that may be exploited to nowcast official inflation figures. Such well timed info on a granular stage additionally allows resolution makers to get first and really robust indication of hovering shopper costs in actual time.

Authors’ notice: The views expressed are the authors’ private opinions and don’t essentially replicate the views of the Deutsche Bundesbank or the Eurosystem.

References

Afunts, G, M Cato, S Helmschrott and T Schmidt (2022), “Russia’s invasion of Ukraine has led to greater inflation expectations of people in Germany”, VoxEU.org, 20 April.

Anayi, L, N Bloom, P Bunn, P Mizen, G Thwaites and I Yotzov (2022), “The Affect of the Conflict in Ukraine on Financial Uncertainty”, VoxEU.org, 16 April.

Aparicio, D and M I Bertolotto (2020), “Forecasting Inflation with On-line Costs”, Worldwide Journal of Forecasting 36(2):232–247.

Artuc, E, G Falcone, G Porto and B Rijkers (2022), “Conflict-induced meals  value inflation imperils the poor”, VoxEU.org, 1 April.

Beck, G, Okay Carstensen, J-O Menz, R Schnorrenberger and E Wieland (2022), “Utilizing high- frequency scanner information to guage German meals costs in actual time”, Working Paper.

Cavallo, A (2020), “Inflation with COVID Consumption Baskets”, NBER Working Paper 27352:1–18.

Cavallo, A and O Kryvtsov (2022), “What Can Stockouts Inform Us About Inflation? Proof From On-line Micro Knowledge”, NBER Working Paper 29209:1–39.

Cavallo, A and R Rigobon (2016), “The Billion Costs Mission: Utilizing On-line Costs for Measurement and Analysis”, Journal of Financial Views 30(2):151–178.

Destatis (2022), “Advert hoc Analysis of Experimental Knowledge Reveals Stockpiling Purchases of Edible Oil and Flour”, Federal Statistical Workplace of Germany (Destatis). 

Espitia, A, S Evenett, N Rocha and M Ruta (2022), “Widespread meals insecurity will not be in- evitable: Keep away from escalating meals export curbs”, VoxEU.org, 4 Might.

Harchaoui, T and R Janssen (2018), “How can Huge Knowledge Improve the Timeliness of Official Statistics?: The Case of the U.S. Client Worth Index”, Worldwide Journal of Forecasting 34(2):225–234.

Worldwide Financial Fund (2022), World Financial Outlook. Conflict Units Again the World Restoration, Washington, DC.

Joseph, A, G Potjagailo, E Kalamara and G Kapetanios (2021), “Forecasting UK Inflation Backside Up”, mimeo.

McGuirk, E and M Burke (2022), “Conflict in Ukraine, world meals costs, and battle in Africa”, VoxEU.org, 26 Might.

Modugno, M (2013), “Now-casting Inflation Utilizing Excessive Frequency Knowledge”, Worldwide Journal of Forecasting 29(4):664–675.

Endnotes

1 Our outcomes are a part of the a lot broader analysis venture “Nowcasting Client Worth Inflation in Germany with Retailer and Family Scanner Knowledge” that seeks to analyse retailer and family scanner information in Germany and that contains fast-moving in addition to slow-moving consumption items. Particulars might be discovered at http://www.miggroprices.eu/index.php/analysis.

2 That is additionally consistent with Destatis (2022) who discover that gross sales for edible oil greater than doubled, and flour gross sales greater than tripled compared to the pre-war interval. They use experimental scanner information from a number of retailers beginning in September 2021.