Inflation is calculated based on the weighting of the evolution of prices of goods and services, according to the annual structure of household expenditure - the average of consumption habits.

For example, in Romania in 2022 the structure of the consumption basket was as follows:

➤⠀food products - 33.02%;

➤⠀non-food goods - 49.38%;

➤⠀services - 17.60%.

From a European perspective, it is very important to monitor inflation on the harmonised index of consumer prices - calculated on the basis of a single methodology for all EU countries 🌍

Over the last few quarters, we have witnessed a general acceleration in consumer prices (to the highest in decades), globally, in Europe and domestically. This intensification of inflationary pressures has been driven by a number of factors, from the supply side (overlapping shocks, including the energy market), the demand side (post-pandemic economic recovery) and the geo-political side (events in Ukraine and their aftermath).

For example, according to International Monetary Fund (IMF) data, international energy prices are expected to rise at an average annual rate of 99.6% in 2021 and at an average annual rate of 70.4% between January and November 2022. The development was not driven by a significant increase in energy demand, but by the consequences of the pandemic - the transition to a new economic model based on predominantly renewable energy consumption. In this context, governments have implemented measures to counteract energy market developments, including domestically, and these have recently been extended until spring 2025. ⏱

At the same time, international crude oil quotations have increased at average annual rates of around 70% in 2021 and 40% in 2022.

International food prices also increased by 26.1% y/y on average in 2021 and by 15.2% y/y on average in the period January to November 2022 📈

In the real economy, we have seen a continuation of the post-pandemic recovery in recent quarters, influenced by a number of factors, including the low level of real financing costs (nominal interest rates adjusted for inflation), but also excess savings accumulated in quarters when health restrictions were in place.

You can find more details on all of the above in our Blog article:"Inflation now, a spike". 🙂