Price that never returns

The prices have risen sharply across the board over the past few years. Food, transport, utilities, and a range of essential goods have all adjusted upwards, often within short spans of time, driven by a combination of global shocks, currency depreciation, and supply-side disruptions. These increases were explained, justified, and, in many instances, accepted as unavoidable.

What is far less examined, however, is what happens when those underlying pressures begin to ease. Global commodity prices do not remain elevated indefinitely. Supply chains stabilise, currencies recover, and input costs – at least in part – begin to decline. In theory, this should result in a corresponding adjustment in domestic prices. Yet, in practice, such reversals are neither immediate nor proportionate. Prices, once increased, tend to settle at a higher level and remain there, even when the conditions that necessitated those increases have changed.

This asymmetry has become an entrenched feature of the current economic narrative. When costs rise, they are passed on to the consumer with speed and certainty. When costs fall, the same mechanism does not operate in reverse with equal force. Businesses point to the need to recover losses incurred during periods of volatility, to rebuild margins, and to hedge against future uncertainty.

Households at the lower end of the income scale allocate a disproportionate share of their earnings to essential consumption. Any increase in the price of food, transport, or basic services has an immediate and direct impact on their standard of living. Unlike higher-income groups, they have limited capacity to absorb such shocks. Adjustments are made quickly and often at considerable personal cost, whether through reduced consumption, compromised nutrition, or the postponement of essential expenditure.

When prices fail to adjust downward in line with improving conditions, this strain does not ease. The expectation that markets will, over time, correct such imbalances assumes a level of competition and responsiveness that is not always present. In many sectors, particularly those dealing with essential goods, pricing behaviour is influenced by a range of structural factors, including market concentration, supply chain rigidities, and the prevalence of informal practices. These factors contribute to what can only be described as price stickiness, where downward adjustments are slow, partial, or entirely absent.

Once a higher price level is established, it acquires a degree of permanence. This has implications beyond the immediate economic burden. It shapes perceptions of fairness and erodes confidence in the system. When increases are passed on swiftly but reductions are not, it creates the impression, whether justified or otherwise, that the system operates in a manner that is inherently one-sided. For those already under financial strain, this perception is reinforced by daily experience.

Policy interventions have sought, at times, to mitigate these effects through targeted transfers and temporary support measures. While these provide short-term relief, they do not address the underlying issue of price rigidity. Nor do they reverse the cumulative impact of past increases that continue to define the cost of living.

The question that arises, therefore, is not whether prices should rise in response to changing conditions. That is an accepted feature of any functioning economy. The question is why they do not fall with the same consistency when those conditions improve.

As this imbalance is more openly acknowledged and addressed, the burden of adjustment will continue to fall disproportionately on those least able to bear it. Economic recovery, when viewed through aggregate indicators, may well be underway. But for a segment of the population, particularly the poorest, the reality remains unchanged. Prices have gone up. They have stayed up. And for many, that is where the story ends.

Source: The morning