Inflation is taking over especially “cheap products”. And in Spain more than anywhere else
After years of denying that cheap food prices are rising more than expensive ones, we now know the truth
A few weeks ago, I came across a tweet from a Spaniard in Sweden, in which he expressed surprise that “price convergence in Europe is happening incredibly fast.” This was, as he himself admitted, somewhat misleading: in Sweden, these products were not as common as in Spain. That’s when I thought of Jack Monroe.
This British journalist became the centre of controversy in 2022 when she claimed that cheap products were rising in price faster than others. It raised a huge cloud of dust, forced the authorities to change their methodology, and soon after the government said that this was not true.
However, we now know that Monroe was right.
Welcome to “cheap inflation”. A recent study by Alberto Cavallo and Alexey Krivtsov examined this suspicion in several developed countries between 2018 and 2024. Are the prices of cheaper products really rising faster than those of more expensive ones? To find out, they collected microdata from 10 Western countries and classified products according to their price range.
The findings paint an interesting picture, yes; but above all, a worrying one. “While all price categories grew at the same rate until mid-2021,” since 2022 “cheaper products have grown at a much higher rate than premium products,” they explained.
What does this mean? The key fact is that while the prices of cheap products in Spain increased by 37% between 2019 and 2024, the most expensive products increased by only 23%. The Cavallo and Krivtsov review shows that this is not a specifically Spanish phenomenon. On the contrary, it affects almost all the countries studied.
Of course, Spain is the place where food, expensive or cheap, has grown the most. In fact, the country is the place where food has grown the most. award (along with the Netherlands) and the place where the cheapest ones have grown the most (already alone).
But why? This is the question that Angel Martinez and Isabel González ask themselves in El Mundo. Unfortunately, the Spanish data is of little help. At least, what we have at all. We do not have microdata to know “which products have become more expensive and whether they are concentrated in certain areas, establishments or, as we have seen in the case of food, in price categories.”
What seems clear is that much of this can be attributed to the “strong inflation of the last three years and the slow recovery of the acquired power” of most households. Ultimately, the two main explanatory mechanisms used by Cavallo and Krivtsov are important here: on the one hand, “products tend to suffer more from supply chain problems,” and on the other, “households buy the cheapest goods, which puts upward pressure on their demand and, ultimately, on their prices.”
In any case, the x-ray is terrible. In this context, it is not unusual (always according to Martinez and Gonzalez) that “a significant percentage of consumers who, even when most of them have regained their purchasing power on paper, continue to feel that their purchasing power is still below normal levels ‘before the pandemic’.” Moreover, this percentage is concentrated among the most socioeconomically vulnerable segments of the population.
Image | Eduardo Soares
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