Summer heat to drive eurozone food inflation to 3% in 2027

Eurozone food inflation fell to 1.6% in June, its lowest level since mid-2021, offering consumers a respite after years of painful price rises. However, economists at Oxford Economics and Deutsche Bank caution that this easing is temporary, with food prices poised to accelerate again in 2027.

The looming price reversal stems from two distinct forces. First, the recent oil and fertiliser shock triggered by the Iran war is still working its way through the agricultural supply chain. Second, and more critically, this summer's extreme heatwaves across Europe have caused unavoidable crop damage.

Commodity prices typically take about a year to reach supermarket shelves because farmers initially absorb higher energy and fertiliser costs. Although Brent crude has fallen back to around $83 a barrel after spiking to $118 during the conflict, Deutsche Bank estimates the spring shock will still lift euro area food prices by 0.8% over the next year. Oxford Economics puts the inflationary hit at 0.5 percentage points.

Yet the weather represents a greater threat to household budgets. "We think this summer's heatwaves will be a stronger upward driver of food prices next year than the war," Oxford economists Tomas Dvorak and Ricardo Amaro wrote. A strong El Niño is intensifying these conditions, and the firm estimates the weather alone could add a full percentage point to food inflation next year.

As a result, Oxford Economics expects eurozone food inflation to rise to around 3% in 2027, having lowered its 2026 forecast for food, alcohol and tobacco inflation to 2.1%. The combined effect of the commodity shock and heatwave is forecast to peak in the first half of 2027, adding roughly 0.1 to 0.15 percentage points to overall eurozone inflation.

The outlook points to a structural shift for the European economy. A 2023 ECB working paper found that as global temperatures rise, crops become increasingly vulnerable to heat stress, amplifying the inflationary impact of extreme weather. The central bank estimates that a heatwave similar to 2022 would push European food inflation up by roughly one percentage point if it occurred under 2035 climate conditions, compared to 0.67 percentage points today.

For now, consumers continue to benefit from a strong 2025 grain harvest, an oversupply of raw milk, and stabilising costs for coffee and chocolate. Almost half of all food items have become cheaper over the past three months. But the mild inflation figures currently supporting the European Central Bank's easing cycle mask a building cost pressure that will eventually arrive at the checkout.