Inflation is down, the European Central Financial institution is (largely) happy, and the spillover results of the Iran warfare are largely contained for now. So why does going to the grocery store nonetheless really feel like monetary self-harm?
Merely put, decrease inflation doesn’t routinely result in decrease meals costs. Low inflation solely implies that costs are rising extra slowly than earlier than, whereas the harm from the cruelest meals value shock in a era stays deep-seated, with the consequences not going away anytime quickly.
1. The value stage by no means fell. I simply stopped sprinting.
This is the trick inflation statistics provide you with: When analysts say meals inflation has “fallen to 2.8%,” they imply meals is getting costlier at a slower tempo, not cheaper. Costs don’t reverse when inflation declines. They only cease climbing on the similar pace. Even when the climb is sluggish, the mountain stays there.
Throughout the EU, meals and non-alcoholic drinks recorded the only largest cumulative value enhance of any client class over the previous decade, rising by 33.2% between 2016 and 2025, greater than vitality, providers and different basket elements, in accordance with Eurostat harmonized inflation knowledge.
Globally, meals value ranges have been practically 46% greater in mid-2025 than in December 2019, in accordance with OECD knowledge. A rise of this magnitude took simply six years to build up, whereas earlier than the pandemic it took 16 years to achieve related proportions.
Psychology can also be essential. Meals costs disproportionately form how folks really feel about inflation general, the European Central Financial institution’s (ECB) Shopper Expectations Survey discovered. That is exactly as a result of folks buy meals so often that meals costs take up a big portion of their budgets, and the vary of substitutes aside from meals costs is restricted.
The ECB experiences that one in three euro space shoppers are presently fearful about having the ability to purchase the meals they need.
2. Your wages have gone up – and also you’re paying for it too.
As soon as vitality and provide chain prices stabilized, a brand new sort of strain emerged within the type of labor. Everybody concerned within the meals provide chain acquired a increase, together with farm employees, manufacturing facility workers, logistics employees and cashiers.
Typically, this can be a good factor. The issue is, it prices cash, and that price exhibits up in your receipt.
The ECB’s analysis on meals value drivers within the euro space exhibits simply how essential that is, with wages within the agricultural sector rising by 6.2% year-on-year in 2022 and rising once more by greater than 5% via 2023.
In transportation and storage, a key hyperlink in getting meals to cabinets, wages rose 4.3% in 2022 and 6.3% within the first three quarters of 2023. In keeping with ING Analysis, labor prices usually account for 10-15% of the overall price of meals manufacturing.
Labor prices throughout Europe rose by a mean of 5.1% in 2025, nonetheless outpacing meals value inflation, in accordance with McKinsey’s 2026 Grocery Market Standing Report.
In Germany, wages rose by 4.0%, whereas meals inflation was solely 2.2%. In different phrases, retailers soak up solely a part of the distinction.
The ECB’s personal wage tracker predicts that negotiated wage will increase will stay steady at round 2.6% till 2026, that means that these structural pressures aren’t going away, even when they’re fading considerably on the edges.
3. Upstream prices rise once more – shelf delays
Simply because the commodity market started to relax, a brand new shock arrived. In keeping with Eurostat’s agricultural product value knowledge for the primary quarter of 2025, milk rose by 12.6% year-on-year, eggs by 10.7% and cereals by 9.6%.
These are inputs from upstream and take months to achieve grocery store cabinets. In the meantime, of the 64 meals objects tracked by Eurostat, all however eight recorded value will increase in 2025. Chocolate rose 17.8%, frozen fruit rose 13% and beef and veal rose 10%.
Egg costs rose by greater than 20% in 5 EU nations, together with 29% within the Czech Republic and 27% in Slovakia.
Additional again within the provide chain, the issue arises once more. The World Financial institution’s Meals Safety Replace for April 2026 identified that urea, a serious fertilizer, has surged by practically 46% month-on-month as a result of disruption within the vitality market brought on by the Center East battle.
The ECB has clearly highlighted “the lagging results of previous worldwide meals value will increase” as the explanation meals inflation will stay excessive till 2027, with workers forecasting that inflation will stay “barely above 2%” all year long.
There’s typically a lag between greater prices for farmers and better costs in shops. Worth shocks that hit farms within the spring usually attain shoppers by the autumn.
4. Supermarkets aren’t profiteering, however in addition they do not soak up prices.
The intuition to denounce company greed is comprehensible and politically common. Nor does it essentially maintain as much as scrutiny.
A peer-reviewed examine revealed in January 2025 analyzed practically 89,000 European meals and beverage producers from 2013 to 2022 and located that value markups (margins above marginal prices) really declined over this era.
In the meantime, the sector’s common EBIT margin was simply 2.8%, in accordance with McKinsey’s 2026 European Groceries report, which it described as “extra of a lull than a restoration” after years of compression. Equally, S&P International’s evaluation discovered that greater than half of rated European retailers won’t be able to return to pre-pandemic revenue margins by 2025.
These aren’t profit-seeking industries. These are industries with only a few buffers. As prices rise attributable to wages, vitality, packaging rules, agricultural inputs, and so forth., there are few methods to soak up these prices aside from via greater costs. The actual query just isn’t whether or not prices will likely be handed on, however how shortly.
5. The EU common hides one thing even sadder within the East
The Europe-wide headline determine of meals inflation of round 2.8% in 2025 appears manageable, a minimum of should you reside in Paris or Rome. In case you reside in Bucharest or Tallinn, issues look fairly powerful.
France recorded meals inflation of simply 0.7% in 2025, whereas Romania recorded 6.7%. Nevertheless, the annual inflation charge solely captures the speed of change. Eurostat’s HICP meals index, which tracks cumulative value ranges since 2015, offers a extra full image of how costs are actually faring.
Hungary was at 204.56, that means meals costs have greater than doubled since 2015. Estonia has 180, Lithuania 177 and Poland 174. France, in contrast, has 135.
What makes this significantly painful is that meals prices are a a lot bigger a part of family budgets in Jap Europe than in Western Europe.
In keeping with Eurostat nationwide accounts knowledge, Romanian households spend round 25% of their earnings on meals and non-alcoholic drinks. In Bulgaria this determine is round 21% and in Latvia 20%.
Evaluate this to 11.5% in Germany, 9.3% in Luxembourg and 11.7% within the Netherlands.
The nation, the place meals costs have risen 2.5 instances since 2015 and 1 / 4 of family earnings is spent on groceries, just isn’t experiencing the identical actuality as France, though each are technically within the euro zone. The ECB goals to maintain inflation close to its 2% goal.
