The intensity and scope of inflationary pressures rose over 2022 and contributed to the propagation of price increases in energy and food to the other categories of goods and services in the Harmonized Index of Consumer Prices (HICP). To analyse the spillover effects across HICP components, a model was estimated to measure the impact on the evolution of prices for each component of price changes in the other ones.

The analysis confirms the recent rise in spillover dynamics. In the decade preceding the pandemic, the category of energy goods “exported” the most indirect effects towards the other goods and services. Food is also crucial in explaining the variations in prices. By including data up to August 2022, non-energy industrial goods play a more prominent role as the origin of inflationary pressures, also increasing the relevance of the effects triggered by processed food and energy goods.

For more details, check the Box 6 “Increase in spillover effects across HICP components”, published in the Economic Bulletin of Banco de Portugal December 2022.

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

If you want to receive an e-mail whenever a new “Economics in a picture” is published send your request to info@bportugal.pt.