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Rising food and energy prices have a greater impact on families with fewer resources

01.04.2022

Economics in a picture: Rising food and energy prices have a greater impact on families with fewer resources

Inflation in Portugal increased significantly in 2021 and early 2022, reaching 4.4% in February 2022 (-0.3% in December 2020). The acceleration was generalized to the main aggregates, with emphasis on the contribution of energy goods. In February, the year-on-year rate of change in energy goods reached 15.2%. Food prices also increased, with year-on-year rate of change of 4.2% in February. Upward pressures on these prices intensified by the military conflict in Ukraine.

The shock on purchasing power is particularly significant for families with lower incomes and expenditures. Spending on food and energy represents almost half of the total expenditure of households in the lowest expenditure quartiles, with the share of food being more than a quarter of their total expenditure. In addition, food and energy are essential goods and therefore the quantity consumed does not decline significantly in response to price increases. The consumption of households in the highest expenditure quartiles is less concentrated in this type of expenditure. Families with greater resources also have greater adjustment capacity, and can mitigate the impact of the shock with savings, in particular, the high amounts accumulated during the pandemic.

 

For more details see Box 3 “Recent developments in Portuguese inflation and comparison with the euro area” published in the Economic Bulletin of Banco de Portugal, March 2022.

 

Prepared by Carlos Melo Gouveia. The analyses, opinions and findings expressed above represent the views of the authors and not necessarily those of the Banco de Portugal or the Eurosystem.

 

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