• The Bank of Spain warns that food will become even more expensive in the coming months

The price of food is a concern. Consumers, who pay 16.7% more expensive than a year ago in the supermarket; to institutions such as the Bank of Spain, which have predicted more inflationary pressures in the coming months, and to the Government, which already recognizes that it is a cause for concern but does not contemplate new measures. Even so, the Ministry of Economy wants to send a message of some tranquility: the inflation of processed foods will peak in April, although it is unknown what will happen to fresh foods.

Sources from Nadia Calviño's team acknowledge that it is impossible to predict how the price of fresh fruits or vegetables, eggs or meat, foods that are very conditioned by factors other than the price of energy such as fertilizers, crops or climate – it could not be predicted, they say, the current drought, which is the most durable and intense that Spain has experienced in many areas since at least 1970. But they are optimistic about the price of all the processed foods we consume – from bread to yogurts – which they believe that in the month of April or even in this month of March they could present their peak of year-on-year inflation.

Overall, the shopping basket in the supermarket will continue to rise in the coming months – there will be positive monthly inflation rates – but if the fresh ones do not give scares, the Government believes that the year-on-year rate of inflation (what prices rise compared to the same months last year) could grow less and less. thus starting a downward path.


It takes a while from when costs start to fall until that cut is reflected in prices. It is true that prices are taking longer to fall than we could anticipate, but it is because there are costs other than energy that are affecting prices. Cereals are falling in price, but rice is rising a lot on the international market, the price of olive oil is still affected by harvests and fruits and vegetables are also rising for climatic reasons and supply shortages. When these factors normalize, we expect the drop in costs to translate into a fall in inflation," they trust.

They are more optimistic than in the Bank of Spain, where they warned this week that the year-on-year rate of food inflation will continue to rise predictably.

Enrichment of enterprises

The sharp rise in prices in supermarkets has unleashed doubts in recent months about whether distribution companies had taken advantage of the inflationary environment to raise prices more than their costs have risen and, in this way, achieve a higher profit margin. The publication of the results of some large companies such as Mercadona, which in 2022 obtained 5.6% more profits, or Carrefour, which globally earned 20% more, have fueled criticism even from some members of the Government, such as the Minister of Social Affairs Ione Belarra.

However, from the Ministry directed by Nadia Calviño deny that distribution companies are increasing their margins.

"In general there has been stability in the evolution of distribution margins and we are seeing a reflection of the increase in costs," say government sources, although they warn that they are monitoring other segments of the food chain – ranging from the farmer to the retail distributor, through intermediaries, the agri-food industry and wholesale distributors. "Not only do you have to look at the evolution of margins in distribution but also in other parts of the chain, for different activities, different types of company and see if there are elements that point to increased margins. We are vigilant, but at the moment there is no evidence of second-round effects on margins or wages," they explain.

According to their calculations, in the total economy excluding oil refining activities and wholesale electricity distributors, business margins remain around 9.6% of sales, in line with pre-pandemic levels. In these two segments of the energy sector there has been an increase in profit margins, due to the increase in the price of oil in international markets due to the fall in supply from Russia.

They ask companies to continue like this and not seek to enrich themselves at the expense of inflation: "Raising margins is bread for today and hunger for tomorrow, it will not improve the situation of companies." In fact, they believe that as costs fall – especially energy – competition can be expected to bring new discounts and price drops: "It's time for sales," they trust.

The usefulness of lowering VAT

On 1 January, the reduction of VAT from 4% to 0% came into force for bread, flour, milk, cheese, eggs, fresh fruits, legumes and vegetables; and 10% to 5% for olive oil and pasta. These products – with the exception of legumes and vegetables – fell in price in January, but in February they rose again, so the tax discount was diluted.

Even so, the Government does not believe that the drop has been useless, but that it has been compensated by the increase in prices caused by other factors, such as climate. According to his calculations, the price of food would have risen by 3.3% in just two months had it not been for the VAT reduction. The increase that has been avoided is lower than the approved cut because the reduction in the tax has not been transferred by 100% by distributors, but they believe that it is something positive since it has relieved the household bill.

This measure expires on June 30 and, if by then the economy continues to behave well, the Government does not contemplate having to extend it: "We will see which measures can be extended and which cannot, but what we are seeing now is that the economy improves and is much better than anticipated," they emphasize.

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  • Nadia Calviño
  • Petroleum
  • Carrefour
  • Mercadona
  • Inflation