Hefty increases in the price of everyday essential products is pushing many consumers to cut their spending on non-essential items, which is leading to a drop in sales, the Chamber of Small and Medium Enterprises said.

The Chamber was asked for its views on consumer spending in the past months, particularly seeing that inflation has become a major concern, as prices of both locally-produced as well as imported items continue to go up.

Inflation hit hard at the beginning of the year, more so since the Russian invasion of Ukraine in February.

Eurostat said in a statement last week that the euro area annual inflation rate was 8.6% in June, up from 8.1% in May. A year earlier, the rate was 1.9%. 

The data also found that the lowest annual rates were registered in Malta (6.1%), France (6.5%) and Finland (8.1%), while the highest annual rates were recorded in Estonia (22%), Lithuania (20.5%) and Latvia (19.2%).

Food was the main contributor behind the June increase. Annual inflation in the food and non-alcoholic beverage index increased by 1.7 points, followed by restaurant and hotel prices that went up by 1.1 points.

The rise in prices is the major concern for business people, according to a study conducted by the Chamber of Small to Medium Enterprises. This worry was ticked by 17.5% of 250 participating businesses, followed by labour shortage and importation problems.

Asked about the issue by this newsroom, the Chamber of SMEs said that “the rise in prices is practically hitting all sectors; however the food sector is one of the most impacted”.

Last May, NGO Caritas had conducted a survey which showed that the average family of four has increased its expenditure on food bills by €100 a month, when compared to 2020.

The survey entitled The minimum essential budget for a decent living, which is usually carried every four years, focuses on the minimum financial amount people need to live decently in Malta. This year’s issue comes earlier than normal after the foundation felt the need to conduct it because of the Covid-19 pandemic and the economic problems it brought with it.

According to the same study it was the elderly who were the most hit with these increases as it was revealed that they now need an extra €1,400 a year to cover basic food and healthcare costs as a result of increases in prices on essential goods.

Despite this, when asked whether it was experiencing a rise in complaints from its members with regards to customers’ spending habits, the Chamber of SMEs said that “not really, we might have feedback related to this during our next survey”.

The Chamber added that “however, we are seeing that sectors that offer products/services which are not a necessity, such as furniture or decor, are reporting that consumers are taking a step back”.

It is clear that since more money is being spent on essential items, consumers are postponing any expenditure on other items they do not require on a daily basis.

Most businesses are not trying to go round the system by changing their suppliers in a bid to find cheaper prices. The Chamber said that businesses are sticking to their existing suppliers due to the long-term relationship, with only a few of them opting to import from different countries.

Social media has provided an open platform for people who want to air their views about rising costs. Many opt to post photos of bills they get when they go to restaurants or supermarkets, noting that dining out has also become more expensive. Others say they are trying to keep their shopping list shorter and, while in the past they used to buy items without looking at prices, they are now making comparisons in order to keep their bill as low as possible. Some have even suggested “a fixed price” on essential goods which, in the age of liberalisation, is not under consideration.

The Malta Competition and Consumer Affairs Authority was also contacted for its take on this.

In answering questions sent by this newsroom, the MCCAA said that it mainly received queries related to the increase in prices of ordered goods/services where a deposit has been paid and where delivery and/or installation is to be carried out.

“There are instances where traders are asking consumers to pay a higher price. Nevertheless, in such instances the trader has to honour the original sales contract agreed with the consumer,” it continued.

The Authority said that other complaints refer to different prices at cash point from the shelf price. In such instances, the Authority carries out surprise inspections in such reported outlets where a random basket of goods, that includes products indicated by consumers, is carried out to ensure that any alleged breaches are immediately stopped.

“As from January of this year we received 26 such complaints of which 25% were found compliant upon inspection, just over 50% have regularised their position, while the rest are being looked into,” it said.