Five years on from lockdown the cost of living is higher and it will remain so

Not only the price we pay for goods such as eggs, olive oil, coffee and chocolate have risen since the coronavirus pandemic 5 years ago. There have also been increases in the price we pay for public transport, housing and for home-improvement/repair work carried out by builders, decorators, plumbers, electricians, etc.)

However, wages have also increased. The financial expert Chris Sugira says that inflation is not necessary a bad thing as long as it remains at a level that is manageable. 

The rate of inflation is a figure that shows how much prices have risen on average. Usually, a comparison is made between current price levels and prices a year ago. At the end of 2024 the year-on-year inflation rate was 3%. This means that at the end of last year prices were on average 3% higher than was the case at the end of 2023. In 2024 inflation was much lower than was the case in 2022, when the energy crisis pushed up inflation to around 10%. Although prices are still rising, they are rising less quickly than a couple of years ago.

A moderate rate of inflation is not necessarily bad for the economy. On the contrary. “It ensures that consumers do not postpone purchases indefinitely, and it helps companies remain profitable”, Chris Sugira said. 

The European Central Bank (ECB) aims for an inflation rate of around 2%. This is a level viewed as being conducive to price stability and economic growth.”

The sharp rise in the rate of inflation from 2021 is largely due to a combination of the coronavirus pandemic and the war in Ukraine. “During the pandemic, consumer and business spending fell. When the economy rebounded, demand for goods and services suddenly increased, while the supply of raw materials and products had been disrupted. This led to price increases.”

People with fixed-rate mortgages and other fixed-rate loans benefit when there is higher inflation as wages increase, but repayments stay the same. However, those wishing to borrow money now face higher interest rates than was the case before inflation started to rise. Savers lose out when inflation is high(er) as the real value of the money they have set aside depreciates more quickly. Even if they have put their money on to a savings account the rate of interest given is usually far lower than the rate of inflation. 

In addition to rising inflation, consumers are also concerned about phenomena such as shrinkflation, greedflation and skimpflation. Luc Lambrechts from Antwerp told VRT Radio 2’s consumer affairs programme Win-Win that “I made a list of products that have not only become more expensive but also are now sold in smaller packaging than used to be the case: Tahiti shower gel, toothpaste, cat treats, even Tuc crackers now seem to contain less salt than they did”.

Chris Sugira says that so-called “new formulas” and changes to the size of a product’s packaging could be example of shrinkflation. While smaller quantities of a product might be more convenient, goods sold in smaller quantities are more expensive than goods sold in standard sized packs. For example, the cola contained in 33cl can sold at 1 euro is more expensive that the cola sold in a 1.5l bottle sold at 2.40 euro. “The only tip I can give here is to really look at the price per unit when comparing product prices”.  

“Greedflation” (graaiflatie in Dutch) was Word of the Year in Flanders in 2023. Greedflation is the practice of companies taking advantage of higher inflation to raise the price of their products by more than is really necessary. There is no law prohibiting this and it is in fact simply an example of companies doing what companies are there to do: pursue profit. However, not all companies engage in “greedflationary” practices and greedflation is difficult to prove anyway. 

Skimpflation, whereby where manufacturers tinker with the ingredients in their products is also an issue. For example, they put less minced meat their spaghetti Bolognese ready meal or the minced meat they use is of a lower-quality than was previously the case. However, once again “This is difficult to prove, as manufacturers are not obliged to report adjustment made to their recipe, unless there could be issues related to allergens.” 

In the Netherlands, the Dutch consumers’ association was able to prove that Bertolli had reduced the olive oil content in its “pesto rosso” from 10% to 4%. Meanwhile, the percentage of vegetable oil in Becel’s “Romig” spread was found to have fallen from 70% to 59%. Finally, a supermarket chain’s own brand bolognaise sauce was found to contain just 11% meat compared to 18% previously. “This is a way for food manufacturers to try and cut their costs” Chris Sugira said.