Czechs are feeling the pinch, research shows. Spending on food is particularly increasing.
Household expenses in the Czech Republic are rising, despite inflation staying below two percent at the beginning of the year. The main reason is the higher price of food. Further price increases could deepen this trend. The ongoing conflict in the Middle East is primarily to blame.
According to a survey by Ipsos for Home Credit, 65 percent of households now have higher monthly expenses than a year ago. We especially pay more for food.
"The prices in the supermarkets I visit are generally increasing despite various discount promotions in recent months. I'm trying to save and think more about what I buy. From the people I know, most of them are doing the same. I'm also retired, so every penny counts,”
said Jiří Vopat from the fourth Prague district to the editorial team, adding that it also simultaneously reduces food waste.
In addition to food, expenses for energy, transportation, and services are also increasing
About 40 percent of us think that the reason for rising prices is overall price increases, higher energy costs, transportation, and services.
On the contrary, we are trying to save on travel and clothing. Others are cutting back on restaurant visits. Similarly, the number of people saving on subscriptions or reducing spending on hobbies is increasing.
The area unaffected by the mentioned development is primarily healthcare. Only five percent of respondents skimp on it.
“Czechs behave quite rationally when saving. They first cut spending that can be postponed or completely omitted. More than a third of households cut back on travel, and 25 percent of households handle food, clothing, and footwear purchases more frugally, while only a minimum of people touch healthcare. It is evident that even under the pressure of higher prices, households try to protect basic needs and health,”
The current situation was described in a press release by the chief analyst of Home Credit, Jaroslav Ondrušek.
A Few Thousand More is Enough
The survey also investigated how much additional money households would need to manage their expenses better. The most common response mentioned an amount between three and five thousand crowns per month. 58 percent of respondents then mentioned a sum ranging from two to seven thousand crowns.
"The data shows that the majority of households perceive higher expenses today, but the hardest impact of price increases is on budgets with lower incomes. Among households with an income of up to 30,000 crowns, 29 percent of respondents report a significant increase in expenses, while for households with an income above 70,000 crowns, it is only eight percent. Women and people aged 45 to 53 also perceive the rise in expenses more acutely,"
said ČTK Ondrušek.
According to the survey by the STEM agency for the consulting company KPMG, economic difficulties persist mainly among people aged 45 to 59, workers, and operational employees.
Inflation is accelerating
At the same time, consumer prices are rising the fastest in six months. In April, year-on-year inflation accelerated to 2.5 percent from 1.9 percent in March. Price increases were once again driven primarily by fuel due to the conflict in the Middle East, as indicated by the data from the Czech Statistical Office. The prices of fuels and lubricants increased by nearly a quarter compared to the same period last year after a 13 percent rise in March. In the same period, liquors and spirits, wine, and tobacco products increased by nearly six percent, and beer by 2.7 percent.
Compared to the previous month, consumer prices increased by 0.5 percent. April's inflation was thus the highest since last October when consumer prices also rose by 2.5 percent year-on-year.
And it could get worse. The more expensive fuels have not yet manifested in other items of the consumer basket.
"The gradual increase in prices in the Czech economy is a result of the current geopolitical situation, which pressures higher costs on entrepreneurs. We are also observing increasingly stronger efforts by large suppliers to raise prices without any objective reason,"
The president of the Union of Trade and Tourism and vice president of the Chamber of Commerce, Tomáš Prouza, shared his perspective with the server Novinky.cz.
The Ministry of Finance also downgraded its outlook for the Czech economy in April due to the conflict in the Middle East. This year's average inflation is expected to be 2.5 percent, while in January the ministry had anticipated 2.1 percent. Next year, it is expected to reach 2.8 percent.
If the war in Iran continues for a longer period, the ministry also warned of the risk of worse economic development. In that case, one could expect a further increase in oil and natural gas prices, which would negatively impact energy-intensive sectors and lead to a slowdown in household consumption growth.
Sources: author's article, ČTK, Novinky.cz, Home Credit, KPMG
