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Inflation slows in summer season

CONSUMER prices in Slovakia have for several months remained at their lowest levels since 2010, according to market watchers who had originally expected slightly higher prices in July than the actual data released by the statistics authority on August 12. Inflation rose 1.5 percent in July as compared to the same month in 2012, but posted a drop of 0.1 percent month-on-month. Over the year’s first seven months consumer prices have increased by 1.8 percent on average, the Slovak Statistics Office said.

CONSUMER prices in Slovakia have for several months remained at their lowest levels since 2010, according to market watchers who had originally expected slightly higher prices in July than the actual data released by the statistics authority on August 12. Inflation rose 1.5 percent in July as compared to the same month in 2012, but posted a drop of 0.1 percent month-on-month. Over the year’s first seven months consumer prices have increased by 1.8 percent on average, the Slovak Statistics Office said.

Prices grew year-on-year within the education sector by 7 percent, with food products and non-alcoholic beverages posting 4.3 percent growth and alcoholic beverages and tobacco growing by 3.1 percent. Hotels, cafes and restaurants have become more expensive by 2.7 percent, recreation and culture by 2.2 percent and health care services by 1.7 percent. Prices dropped on an annual basis in miscellaneous goods and services by 0.4 percent and in transport by 0.2 percent, according to the statistics authority.

On a month-to-month basis, prices of clothing and footwear dropped by 0.9 percent, followed by food stuff and non-alcoholic beverages by 0.6 percent. In contrast, prices in the areas of recreation and culture went up by 0.5 percent, transportation by 0.3 percent, alcoholic beverages, tobacco products, hotels, cafes and restaurants by 0.2 percent, the statistics authority reported.

“Inflation has been for several months moving at its lowest levels since the end of 2010,” Martin Baláž, an analyst with the Slovenská Sporiteľňa, said.

Mainly lower prices of food products, which dropped by 0.6 percent month-on-month, have contributed to the dip, Baláž said, while attributing the significant drop in prices of vegetables to the seasonal effect. Still, “the drop in the prices of fruits, meat and oils was surprising,” he said.

After several months of being a non-factor the prices of fuel contributed slightly to inflation, as prices rose in July, Baláž added.

Ľubomír Koršňák of UniCredit Bank explained that prices of fuels reflected the seasonal spike in oil prices on global markets. However, despite these developments “the prices of fuel remain still slightly lower than during the same period last year,” Koršňák said.

Market watchers expect fuel prices to continue growing in the upcoming month, Koršňák added.

On the basis of the recent data, the annual harmonised inflation for July could reach 1.5 percent or higher, Baláž said.

“We expect that inflation also in the upcoming months will be significantly lower than one year ago, while for the whole year it could reach a level around 1.8 percent,” Baláž said. Last year’s inflation stood at 3.6 percent on average.

According to Koršňák, the 0.6 percent drop in food prices in July can be entirely attributed to falling prices of vegetables and fruits. After considering seasonal factors, food prices grew year-on-year by 0.5 percent, Koršňák said. “The drop of seasonal vegetables was slower than usual,” he said.

“The risk of the growth of food prices should be weakened by a better harvest this year,” Baláž said.

Food prices remains the main driver of inflation, Koršňák said, adding that their year-on-year growth should slow down in comparison to last year’s statistical base. Furthermore, the prices of agricultural commodities in Slovakia have dropped in recent months and with a “slight delay this drop should be reflected also in the final prices of food in the form of slowing down the dynamism of their growth,” Koršňák said.

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