According to the latest Statec projections, the inflation rate is expected to be around 2% in 2021 Shutterstock

According to the latest Statec projections, the inflation rate is expected to be around 2% in 2021 Shutterstock

The increase is modest, largely thanks to the 0.4% drop in the price of petroleum products. “Following four months of oil price increases, the trend is broken. Between March and April, oil prices decreased by 0.4%. At the pump, motorists pay 1.8% less for a litre of diesel, while the price of a litre of petrol increased by 0.7% compared to March. The price of heating oil was down 2.3%, while the price of city gas increased by 2.1%. Compared to April of the previous year, the prices of black gold products in the index basket are 28.9% higher,” Statec said.

Excluding oil products, the price of goods and services in Luxembourg increased by 0.1%, “which, however, hides certain opposing price movements at the detailed level of the consumer basket, which cancel each other out,” Statec writes.

Price increase of 0.5% in the restaurant sector

Food prices decreased by 0.2%, month on month. The largest price reductions were observed for fresh seafood (-5.2%), ice cream (-2.6%) and pasta (-2.3%). Price increases impacting the overall result were observed for fresh vegetables (+2.8%), eggs (+2%) and pizzas and quiches (+0.7%). In year-on-year comparison, food prices are -0.5% lower.

On the services side, prices for childcare facilities rose by 1.8% in April. A 0.5% increase was recorded in the restaurant sector. Prices for air travel rose by 10.1%, while prices for package tours fell by 3%. Prices for cell phone services fell by 2.4%.

The annual underlying inflation rate fell 0.5 percentage points to 1% in April. The general index for April expressed on a 2015 base of 100 stands at 108.19 points. The six-month average of the index reported as of January 1, 1948, increases from 882.99 to 884.74 points. The next indexation will be triggered when the value of 895.78 is reached.

Wage indexation before the end of 2021?

According to the latest Statec projections, the inflation rate is expected to be around 2% in 2021, driven by the continued growth of oil prices (19.6%, 2021 estimate). Statec’s scenario is based on an inflation rate of 1.6% in 2022, in line with the underlying inflation rate, which would take over. The latter would indeed rise, as Statec estimates it at 1.2% for 2021.

Under these conditions, and while in February it was forecasting a next index tranche between the first and third quarters of 2022, Statec now estimates that the index could be introduced before the end of 2021. According to this median scenario, the upward indexation of wages and pensions would fall in the fourth quarter, an assumption that is not so far from the high scenario, in which the surge in oil prices would be more substantial. The more moderate scenario on this point would postpone an indexation to the first quarter of 2022.

This article was originally published in French on Paperjam.lu. It has been translated and edited for Delano.