Luxembourg hasn't yet felt full price punch
Luxembourg consumers haven't yet fully felt the higher prices that could result from economies around the world expanding in tandem as pandemic-related distress and disruptions recede, the Grand Duchy's statistics agency said on Tuesday.
"Commodity prices, which have been rising since spring 2020, are pushing up output prices," Statec said in a monthly update on the condition of the country's economy. "Apart from oil products, the upward pressure has not yet been reflected in consumer prices in Luxembourg."
Worldwide prices for commodities – those basic goods used to make other products from food to cars to electronics – were more than 20% higher in early August than in late 2019, Statec said.
Energy commodities like coal and crude oil have risen in nine of the past 10 months, the World Bank said in a report earlier this month. Fertilisers used to grow food and other plant products have risen 6% in July, with metals and minerals rising 0.2%, the international lender to developing nations said.
Changes in commodity prices can take more than a year before they reach consumers, and by that point they are somewhat absorbed across the various stages of production, Statec said.
"This explains the relative sluggishness of underlying inflation in Luxembourg and in the euro area," the agency said. Except for oil and construction materials like wood and steel, "Luxembourg households have not yet had to face marked price increases."
Fuel prices in Luxembourg increased for the third month in a row in July, Statec said earlier this month. Rising petrol prices could cause inflation in the Grand Duchy to rise temporarily to nearly 3% by the end of 2021, Statec said previously. This year's overall inflation is forecast at 2.2%, but is expected to slow down next year to about 1.7%, the statistics agency said.