In December 2024, consumer prices rose by 1.3% compared to last year, according to preliminary estimates of the Consumer Price Index (CPI) presented at the end of the month. This increase was at a similar rate to that recorded in November 2024, showing a relative stability in inflation rates.
Despite this slight increase in consumer prices, there are some factors that contributed to mitigating the severity of the increase. Among them, a clear decline in the prices of manufactured products, as well as a slowdown in food prices. However, these prices are expected to remain stable over the coming period, as expectations indicate that prices may balance out more in the coming months.
As for energy prices, they have witnessed a slight increase. While transportation service prices continue to rise, which may have a significant impact on the cost of living. However, food and tobacco prices remain almost constant compared to the previous month, which contributes to reducing the effects of inflation on households.
Monthly developments in December 2024
Regarding the previous month, consumer prices increased by 0.2% in December 2024, after declining by 0.1% in November. This increase in prices can be partly explained by higher costs of transportation services, which are a factor influencing monthly inflation. Petroleum products also contributed to the price increase, but to a lesser extent than transportation services.
In contrast, prices of manufactured products fell significantly compared to November. This decline in manufactured products may be the result of fluctuations in production costs or a decline in demand for some goods. Food and tobacco prices remained largely stable, contributing to the reduction of inflationary pressures on households.
Harmonized Consumer Price Index
The Harmonized Consumer Price Index (HICP), an important indicator of inflation in the euro area, rose by 1.8% in December 2024 compared to last year. This slight increase reflects an increase in the costs of goods and services. Compared to November, when the index increased by 1.7%, this rate indicates relative stability in price levels throughout the year.
On a monthly basis, the Harmonized Consumer Price Index increased by 0.2% in December after falling by 0.1% in November. This improvement indicates some recovery in the economy, despite fluctuations in some economic sectors.
Factors affecting consumer prices
Consumer prices are affected by a range of different economic factors that may lead to fluctuations in the cost of living. The most prominent of these factors can be summarized as follows:
- Energy prices: Energy prices are one of the main factors that directly affect consumer prices. This includes the prices of oil, natural gas, and electricity, as an increase in these prices can lead to an increase in the cost of transportation, heating, and industrial production. Higher energy prices cause the costs of other goods and services to increase, which contributes to inflation.
- Food prices: The food sector is one of the most important components in calculating inflation. Food prices are affected by several factors, including weather changes, agricultural policies, and global market movements. Increases in the prices of raw materials such as grains or meat can directly affect the prices of food products for consumers.
- Labor market: Wage and unemployment levels greatly affect the purchasing power of individuals. In the event of low unemployment rates and increased wages, consumers tend to spend more, which increases the demand for goods and services, and thus may lead to an increase in prices. Conversely, if unemployment rates rise.
Global geopolitical and economic factors
Geopolitical crises or trade tensions between countries can affect commodity and raw material markets, leading to price fluctuations. For example, wars or economic sanctions can increase transportation costs or disrupt supply chains, raising the prices of some goods.
Demand and supply: The balance between supply and demand in local and global markets is a major factor in determining prices. Increased demand for products or services without sufficient supply can lead to higher prices. Conversely, if supply exceeds demand, prices may fall to encourage consumers to buy products.
Taxes and tariffs: Tax policies and tariffs also affect production and distribution costs. Raising taxes on goods or services can lead to higher prices for consumers. Imposing tariffs on imports can also raise the cost of imported goods, which in turn affects local market prices.
Technology and innovation: Technological progress can affect production costs and consumer prices. In some cases, technological innovation can reduce production costs and improve efficiency, which contributes to lower prices. In other cases, the high cost of developing new technologies can raise the prices of some goods and services. Climate factors and natural disasters: Bad weather and natural disasters such as floods or droughts may lead to shortages of some raw materials, leading to an increase in the prices of agricultural and industrial goods. These events may also affect supply chains, leading to disruptions in transportation and production operations, and thus higher prices.
Consumer prices reflect complex interactions between several economic and geopolitical factors. Together, these factors control the cost of living and affect consumers’ ability to spend. Therefore, it is necessary to monitor these indicators continuously to understand changes in prices and make appropriate decisions at the governmental and economic levels.
Future expectations
Based on these indicators, consumer prices should remain stable over the coming period. Markets should not witness significant changes in food or tobacco prices, meaning inflation in these categories will remain limited. However, energy and service prices, especially transportation, remain subject to fluctuations that may affect the overall price level.
At the same time, there may be some stability in the prices of manufactured products, but these prices are not expected to witness a significant decline in the near future. This is likely to contribute to limiting the effects of inflation on consumers.
In conclusion, December 2024 data showed relative stability in consumer prices compared to last year. Despite some slight increases in energy and services prices, declines in manufactured prices and a slowdown in food prices had a positive impact in easing inflationary pressures on households. Going forward, consumer prices are expected to continue to fluctuate slightly, but are not expected to witness significant increases that would affect citizens’ purchasing power.
