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

A Slovak prisoner tattooed in Auschwitz, remained silent until he grew very old

Lale Sokolov fell in love in the concentration camp; only those close to him knew his story.

A tattoo, illustrative stock photo

Kiska: Only president can bestow awards

President Andrej Kiska turned to Constitutional Court over the law on state awards recently passed by the government.

President Andrej Kiska granting awards, January 1, 2018

Global warming is a myth, claims a hoax

According to recent hoaxes published online, snow in the Sahara disproves global warming and milk can block airways.

The snowfall in Sahara can be seen in this satellite picture.

Blog: Are flying cars coming to the skies?

At least 19 companies, including a Slovak one, are currently developing flying car planes, but there are still many issues that must be worked out.

AeroMobil