The wave of inflation affecting Malta over the last two years has finally registered a significant decrease, as prices stabilised in July, actually dropping marginally by 0.2 per cent when compared to the prices seen the previous month.

This has pushed the country’s annual inflation rate downward to 4.7 per cent, the lowest level since March 2022.

The update comes after the European Central Bank stated earlier in August that “underlying inflation has likely peaked”.

The highest annual inflation rates in July 2023 were registered in housing (8.9 per cent) and food (8.8 per cent).

On the other hand, the lowest annual inflation rates were registered in clothing and footwear (-2.2 per cent) and water, electricity, gas and fuels (zero per cent).

Looking at the monthly data tells a more nuanced story, with housing seeing the highest increase in prices over June, largely due to a 3.3 per cent increase in rental rates.

On the other hand, food, which has long been the largest contributor to Malta’s high inflation rate, only increased by 0.3 cent in July.

However, rent only accounts for 1.08 per cent of the Retail Price Index, while food has a vastly larger weighting at 21.49 per cent.

This means that even large increases in rental prices hardly budge the inflation rate.

In fact, in July, the largest upward impact on annual inflation was registered in the food index (+1.90 percentage points), largely due to higher prices of take-aways.

The second largest impact was measured in the housing index (+0.70 percentage points), in which materials and services for house maintenance carry a larger weight than rent, and which account for most of the increase.

Eurostat estimates that Europeans spend 24 per cent of their income on housing, but the RPI only gives it a weighting of 7.9 per cent, and does not take into account loan costs.

Meanwhile, a downward impact on annual inflation was registered in the clothing and footwear index (-0.14 percentage points), mainly due to lower prices of garments.

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