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Inflation rate jumped in 2011

CONSUMER prices in Slovakia rose last year by about 4 percent, pushed up by higher prices for energy and food as well as an increase in the country’s value added tax. Since the economic and financial crisis had kept price increases in check during 2009 and 2010, the higher inflation rate in 2011 was particularly noticeable. But economic analysts expect inflation to slow again in 2012. The rate of growth in consumer prices fell slightly at the end of 2011. The Slovak Statistics Office reported on January 13 that the year-on-year inflation rate measured by national methodology was 4.4 percent in December compared to November’s rate of 4.6 percent, which had been the highest inflation rate recorded since November 2008.

CONSUMER prices in Slovakia rose last year by about 4 percent, pushed up by higher prices for energy and food as well as an increase in the country’s value added tax. Since the economic and financial crisis had kept price increases in check during 2009 and 2010, the higher inflation rate in 2011 was particularly noticeable. But economic analysts expect inflation to slow again in 2012. The rate of growth in consumer prices fell slightly at the end of 2011. The Slovak Statistics Office reported on January 13 that the year-on-year inflation rate measured by national methodology was 4.4 percent in December compared to November’s rate of 4.6 percent, which had been the highest inflation rate recorded since November 2008.

“The growth of prices in December was only minimal as the consumer price index increased by only 0.1 percent,” Mária Valachyová, an analyst with Slovenská Sporiteľňa, Slovakia’s largest bank, told The Slovak Spectator.

She ascribed the drop in December’s inflation rate to restrained price growth for fuels and food.
Prices for food and non-alcoholic beverages did not change in December compared with November, Ľubomír Koršňák, an analyst with UniCredit Bank Slovakia said.

“In December we particularly saw prices of fruit and vegetables decreasing while their prices were falling as well when seasonal influences were taken into consideration,” Koršňák wrote in a memo. “On the other hand, prices of meat increased over the last few months. Thus, prices of meat have not mirrored gradually decreasing prices of other agricultural commodities. We assume that deceleration of the year-on-year growth dynamics of food prices will continue during the upcoming months.”

Slovakia’s consumer price index (CPI) increased by 3.9 percent in 2011, while the European Union’s harmonised index of consumer prices (HICP) increased by 4.1 percent.

“Compared with 2010, when the inflation rate was 1 percent, this meant a significant acceleration in 2011,” Valachyová said, noting the impact of higher energy prices, various government measures like the increase in VAT from 19 percent to 20 percent on January 1, 2011, and higher food prices.

Andrej Arady, an analyst with VÚB Banka, wrote that transport costs, accounting for almost 8 percent of average total household spending, registered the most significant jump in prices over the last year, increasing by 6.9 percent. Prices for food and non-alcoholic beverages also registered a significant increase, up by 6.1 percent and these items account for about 18 percent of average household spending. Costs for housing and energy, which make up nearly 27 percent of household expenditure, increased by an average of 5 percent. Prices for furniture, household goods and home maintenance fell by 1 percent in 2011, following a 2.4 percent decrease in 2010.

Valachyová noted that Slovakia experienced higher inflation last year than the average in eurozone countries which she ascribed to delayed price increases for energy.

“In most of the eurozone, energy prices were elevated already in 2010 while in Slovakia the regulatory authority permitted this only in 2011,” Valachyová said.
EU harmonised rate

The growth in consumer prices also decreased in December as measured by the European HICP. The Statistics Office announced on January 16 that the inflation rate measured by HICP in December was 4.6 percent, down from November’s rate of 4.8 percent.

“The average year-on-year growth of prices in Slovakia during 2011 was in line with trends in the eurozone and had accelerated compared with the previous year,” the National Bank of Slovakia stated, as quoted by the SITA newswire.

Predictions for 2012

Most analysts expect a slowdown in price growth during 2012. Slovenská Sporiteľňa predicts inflation will be 3 percent this year while VÚB Banka and UniCredit Bank Slovakia expect the average inflation rate to fall significantly below 3 percent for all of 2012.

“Energy prices should increase at a slower rate than in 2011 and the extent of administrative measures will be less than last year,” Valachyová said.

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