The government has introduced a 10 percent margin restriction in 30 food categories from March 17, affecting more than a thousand products.Continue reading
According to the latest data recorded in the price monitoring system, the price of a significant proportion of nearly 900 products has fallen noticeably, with some private label products costing up to fifty percent less. Although the inflation data will not fully reflect the beneficial effects of the price gap freeze until April, the March figures already indicate a positive outlook, Világgazdaság reports.
Some products have fallen in price by more than fifty percent, while dozens of products’ price reduction was more than forty percent. The products with the biggest price reductions are dairy products.
The question arises as to whether the margin squeeze is not reflected in other products not covered by the price freeze. Dániel Molnár, senior analyst at the Hungarian Economic Development Agency, said earlier to Világgazdaság that there is no way to prevent traders from trying to compensate for the loss of revenue with other products, but market forces are on the government’s side in this situation.
It is a feature of essential products that consumers cannot postpone their purchases, so traders can raise prices with greater confidence and do not have to fear a drop in demand to the same extent.
In contrast, for other non-essential products, consumers are much more price sensitive, which means that they react to price increases by reducing demand, and therefore retailers cannot raise prices as much as they would like. Furthermore, in such a case, there is a chance that the government will further expand the range of products affected.
The impact of the margin freeze is already reflected in the inflation data, although not yet in full because the Hungarian Central Statistical Office only records price data up to the 20th day of a given month.
Thanks to the margin freeze, the prices of around 1,000 products have been reduced or contained. Today, as a result of the measure, the prices of the products concerned have become 18.8 percent cheaper, the Ministry for National Economy said in its commentary on the March inflation data. They recalled that
according to the data of the Hungarian Central Statistical Office, in line with preliminary government indications, inflation had already fallen in March, reaching 4.7 percent on an annual basis, while on a monthly basis it showed stagnation.
In March, food prices were seven percent higher on an annual basis, while on a monthly basis prices were stagnant.
Via Világgazdaság, MTI, Featured photo via Pixabay
