Is everything really so expensive or do we want to profit in the “murky waters”? The prices of products and services are growing at a dizzying pace in all categories and in all sectors. Food prices continue to rise, and in addition to certain measures aimed at taming inflation, it seems that a difficult winter is a certainty, but so is spring. The competent institutions keep reiterating that we are part of the global financial flows, that is, what happens outside, also happens here.
“Longer-term pressures from import prices, especially food and energy, which account for nearly 50 percent of our consumer basket, have affected longer-term and more widespread inflationary pressures because the longer the import pressures are present, the more goods from the consumer basket are affected”, says the National Bank in their analysis. Rising prices and a more expensive consumer basket affect the financial condition of citizens. Reduced purchasing power has been confirmed by all relevant parameters. The double-digit inflation exerts great pressure, standing at 18.7 percent, as measured in September of this year.
The consequences of high inflation are already visible. It creates uncertainty in the decisions of consumers and investors.
Price growth is difficult to control. Do they all have justified growth, at such rates, which we witness daily? Market logic creates dilemmas and confusion because one has the impression that everyone is looking to “hunt in the dark”, and earn more in such circumstances. In an environment of price increases, it is expected that the buyer has no reason to react, as the thesis that everything has become more expensive, “everything has gone up” rings true. Whether or not it should, whether there is logic and justification, is not important, what is important is that there are conditions conducive to a price increase.
Justification for price increases can be found not only as regards energy and food products, but also concerning some products for which there is no economic logic for price increases at such a rate. When the psychological aspect of the consumer is at work, it may be easier for some sectors of trade and services to see a large price “fly” increase at rates “as high as possible”.
But is it justified and should it be so?
The producers argue that they work in extremely difficult conditions, and they demand support from the state.
The Government should make the next move to help now when it is most difficult for them.
Analyzes of the reactions of buyers were published in the media, showing that the prices of the same product in the markets have unrealistic differences, ranging up to 100 or more denars. Where is the justification for such price differences? How is it viable to sell a product in one market for 300 den. while in another, the same product sells for 600 denars. Surely, the manufacturer has factored in all the production costs, but in the end, how can the merchant come out the wisest? The Market Inspection services spoke to the media expressing their view that they carry out continuous monitoring of prices to ascertain whether traders comply with the decision on special conditions in trade, which regulates the margin and the total price.
On the topic of real-unreal situations with the movement of prices, there was a debate about the price of cooking oil, the price of milk, eggs, etc.
Economic analysts from the academic community say that the prices of finished products have doubled and tripled in one year, which does not reflect the real situation because if you look at the price of basic products or the purchase price of milk, wheat, corn, etc., you will notice huge differences. The question arises about where this margin goes, how prices are formed?
As much as there is justification that free market laws and competition apply, one gets the impression that there are excellent conditions to make a profit.
If, on the other hand, one looks in more detail at the financial statements of companies that cover part of the consumer products, from the food sector, then the minerals, metals and energy sector, it is obvious that their profits in this period of high inflation are relatively higher.
Buyers are encouraged to respond. But even if they react, so what? Even if irregularities are found and traders are fined, food prices will not return to their previous levels. Citizens do not have much faith that prices will drop. They continue to cut from their consumer baskets.
In conditions where the purchasing power is reduced and there is high inflation, buyers are in an eternal search for a cheaper product and even go from store to store, comparing prices and buying the cheapest. At the same time, there are speculations concerning raw materials used in production, cheaper ingredients are used, recipes changed, which in turn reduces the quality of the product.
In the market changes, consumer revolt is also induced by the reduced weight of the products. Do the manufacturers and retailers think that the customer doesn’t see that?
Is it fair, under these circumstances? When people are faced with a low standard of living, with a decline suffered even by those who until recently were a little “freer” in their living.
Real chaos is happening in the market, and everyone is justifying the increased costs. The state, to appease, freezes the margins. The last extension of the duration of the measure to limit the margin of basic food products in wholesale and retail trade is for the next three months, that is, until December 31, 2022.
In addition, for the purposes of calming the calls for help to the economy, the Government made a decision in the area of energy that around 200 companies from the food sector will pay electricity at 80 euros per megawatt hour from December 1. The producers of oil, bread and bakery products, flour, milk and dairy products, and the meat and poultry industry are covered. Although the expectations were that this would reduce food prices, since the beginning of December, the calculations of the companies have been changing daily, with the announcement that a reduction is expected from the beginning of next year.
Regardless of how much we argue and analyze, regardless of how much trouble we have, the consumer basket is poorer, wages are low and we have a low standard of living.
Wise as the producers and traders may be, the state should offer help and strategic solutions.
In the end, everyone will pay the expensive bill: the state, producers, traders and buyers.
Maria Georgievska, M.Sc
Editor and host of the business and economics show PROFIT