Rising prices of services are driving inflation – not food

The house does not burn best where it is extinguished

While the Ministry of National Economy (NGM) introduced another margin freeze for 30 food categories as of March 17 in order to reduce price levels, official data shows otherwise: the engine of inflation is clearly the rise in prices in the service sector. Moreover, this trend is not new: every month since November 2023, service inflation has exceeded that of other segments.

24 categories rose more than average

According to detailed KSH data, 24 service categories exceeded the average price increase of 9.2 percent in February. The largest jump was shown by the other services not elsewhere classified group (19.2%), followed by other services related to passenger vehicles (16.3%), and telephone and fax services (16%).

What is behind it?

The price increase in the service sector is primarily due to the increase in wage costs, which, due to the specific characteristics of the sector, is directly and significantly reflected in consumer prices. In contrast to industry or trade, where the proportion of live labor is smaller, wages account for a significant part of costs in service enterprises. As a result, it is almost impossible not to pass on the increase in wages to final consumers – so prices almost automatically increase.