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Slovak deflation deepened in January

Several factors contributed to an overall drop in consumer prices, but economic growth remains.

Food prices influenced core inflation.(Source: Sme)

The Slovak Statistics Office (ŠÚ) issued new data on February 13, suggesting that the overall inflation in Slovakia fell by 0.4 percent year-on-year in January;  consumer prices dropped by 0.4 percent in January compared to the previous year, and they saw a total year-on-year drop of 0.4 percent for the same period.

In January 2015, the deflation deepened against the development last year, analyst with Slovenská Sporiteľňa Katarína Muchová said for the Sme daily.

The good news is that the Slovak economy rose last year at the highest pace in the past three years. In the fourth quarter of 2014 it increased by 2.4 percent. “We expect that the main driving forces of growth remained, as in previous quarters, the domestic demand with positive contribution of household, government and investments,” analyst with J&T Bank Stanislav Pánis told the daily.

The core inflation for January was down by 0.2 percent and net inflation up by 0.3 percent, the TASR newswire quoted the ŠÚ. Overall inflation in January was influenced by core inflation by 0.17 percentage points, while regulated prices had a negative impact of 0.27 p.p., and indirect taxes had no impact on overall inflation. Food prices influenced core inflation by 0.14 p.p., while net inflation influenced core inflation by 0.03 p.p.

Consumer prices dropped by 0.1 percent month-on-month in January 2015. The most pronounced m-o-m decreases in January were seen in transport (1.8 percent); in footwear and clothing (1.5 percent); in housing, water, electricity, gas and other fuels (0.9 percent); and in furniture, household equipment and maintenance (0.1 percent).

On the contrary, prices rose in groceries and non-alcoholic beverages (1.3 percent); in alcoholic beverages and tobacco (1.2 percent); in various goods and services (0.7 percent); in education (0.4 percent); in culture, hotels, cafes and restaurants (0.3 percent); and in postal and telecommunications services (0.1 percent).

Consumer prices saw a total year-on-year drop of 0.4 percent in January 2015, with the most significant decreases recorded in transport (6.6 percent); in groceries and non-alcoholic beverages (2 percent); in housing, water, electricity, gas and other fuels (0.5 percent); and in postal and telecommunications services (0.4 percent). Prices increased y-o-y in education (3.2 percent); in furniture, household equipment and maintenance (1.9 percent); in various goods and services (1.8 percent); in clothing and footwear (1.6 percent); in alcoholic beverages and tobacco (1.5 percent); in hotels, cafes and restaurants (1.3 percent); in culture and recreation (1 percent); and in health (0.3 percent).

The drop in prices in January 2015 (by 0.1 percent month-by-month) can be attributed solely to supply factors such as prices of energy, crude oil and groceries, UniCredit Bank Czech Republic and Slovakia analyst Ľubomír Koršňák told TASR.

Inflation should be pushed down mostly by lower prices of crude oil, which will hinder the revival of demand inflation via its secondary effects in the next few months. “We expect the drop in crude oil prices to stop, and a slight correction in the other direction to occur at some point this year,” he said. “No growth in the prices of groceries is predicted to take place, with inflation expected to stay close to zero or slightly below zero for most of 2015. A more noteworthy y-o-y growth in prices can be expected only at the very end of this year.”

According to Muchová, inflation should remain at low levels and see only gradual and slow growth. “We expect the low prices of crude oil to influence negatively the growth of consumer prices not only in Slovakia but the entire eurozone,” she added. 

Topic: Economics


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