Where are we now and how did we get here?
Prices rose across the board in 2022. By the end of the year, a loaf of white bread in the UK hit an average of £1.30 from about £1.00 compared to a year earlier.1 Across the Channel, a cut of beef rump in France set consumers back an extra 6%.2 Germans paid almost 35% more for milk.3 In Italy, the cost of eating out at a restaurant rose almost 8% year on year.4 On the Iberian Peninsula, Spanish wine cost 9.3% more.5 The price of flowers in the Netherlands went up some 7%6 and, further north, a pastry in Sweden cost 16% more.7
Inflation, as the data above shows, surprised to the upside last year, causing most central banks to abruptly remove the support that had propelled financial markets to elevated levels. Russia’s invasion of Ukraine didn’t help, with commodity prices pushed higher than they would otherwise have been.
Vladimir Putin’s war has also underscored Europe’s reliance on Russian oil and gas. Every European country has had to rethink its energy mix and consider energy security, balancing that against the demands of the energy transition. In many ways, the conflict in Ukraine has proved to be a real-world stress test for environmental, social and governance (ESG) investing.