Spectator on facebook

Spectator on facebook

Deflation did not deepen in August

Though prices are still falling, they are not harmful for the economy.

Illustrative stock photo(Source: SME)

The annual inflation amounted to -0.8 percent in August 2016, down by one percentage point compared with July. The core inflation reached -0.2 percent, while the net inflation reached 0.1 percent, according to the Statistics Office.

Though consumer prices dropped by 0.1 percent in August, their annual fall did not deepen, according to Ľubomír Koršňák, analyst with UniCredit Bank Czech Republic and Slovakia.

“We still do not consider the current level, but especially the structure of deflation, harmful for the economy,” Koršňák wrote in a memo.

Though prices have been falling for more than 2.5 years, the deflation rate is still relatively moderate and driven by supply factors.

“This form of deflation basically does not harm the economy; on the other hand, it supports the consumption of households when the falling energy and food prices increase the disposable sources of households on other expenses,” Koršňák added.

Read also: Read also:Statistics Office: Deflation deepens y-o-y in July

The annual deflation was impacted mostly by prices in transport. Though they increased only slightly (by 0.1 percent month-on-month) as a result of a dynamic seasonal increase in prices in air transport, the dynamics of the annual drop in this category dropped from -3.9 percent to -3 percent. This happened also due to the moderate increase in oil prices on global markets. Thanks to the base effect, the dynamics of the annual drop in fuel prices slowed down to one-digit numbers, Koršňák said.

Also food prices impacted the annual deflation rate, mostly thanks to a lower comparison basis as they fell in August by 0.6 percent m/m. The drop was, however, affected by seasonal impacts, Koršňák explained.

As for the coming months, there is still no stronger driving force for inflation. As a result, deflation will continue during most of the second half of the year. The more favourable base effect will however gradually reduce the deflation rate to zero and the prices may increase again at the turn of the year, when the effect of low oil prices will disappear, the analyst claims.

“The annual drop in prices may be halved already in September,” Koršňák wrote in the memo. 

Topic: Economics


Top stories

Strike ends, unions sealed agreement with Volkswagen

The strike that lasted for six days ends on the morning of June 26.

L-R: Volkswagen Slovakia board member for HR, Eric Reuting, chair of the board Ralf Sacht, and board member for finances, Jens Kellerbach, at press briefing after strike, June 26

Responsible business no longer concerns only charity

The most common activities in Slovakia include fair-mindedness regarding employees, health and safety at work, and environmental protection.

Volunteers from corporate sector help to improve the environment within the initiative Naše Mesto (Our City).

Slovak under-21 team ended before semi-finals of European Championship

The team had been in a good position to continue to the next round of the championship held in Poland.

European Under-21 Champrionship, Poland - Slovak fans

Sporting events surpass philanthropy dimension

These events inspire an active lifestyle and help to develop philanthropy.

Wings for Life attracted more than 155,000 people.