Spectator on facebook

Spectator on facebook

Analysts: inflation slowed down in April, expected to accelerate in May

Expectations for inflation rates have lowered, after the first quarter of 2017.

Illustrative stock photo(Source: SME)

In April 2017, year-on-year inflation amounted to 0.8 percent, in total, while core inflation reached 1.5 percent and net inflation 1.2 percent.

In the month-on-month comparison, core inflation had an impact on the total inflation by 0.14 percentage points (p.p.), with total inflation being affected by regulated prices by -0.01 p.p. and not impacted at all by indirect taxes.

Core inflation was affected by food prices by 0.04 p.p., while net inflation had an impact on core inflation by 0.10 p.p, the Slovak Statistics Office (ŠÚ) wrote on May 15.

Analysts see mild acceleration after a slow-down

As expected, inflation slowed down in April, while it is expected to return to a trajectory of gradual acceleration in May, Ľubomír Koršňák – analyst of the UniCredit bank – commented. The dynamics of y-o-y growth of consumer prices decelerated mainly due to a weakening basic effect for the prices of fuels (moderation of y-o-y- growth, as oil prices started to increase from the bottom since spring 2016, while recovering gradually) and declining prices of alcoholic drinks, as well as slower growth in regulated prices of tobacco.

In April, the dynamics of y-o-y growth of demand inflation slowed down slightly – the index of prices of tradable goods and market services, according to Koršňák. Food prices kept their stable dynamic of y-o-y growth in April.

Thus, inflation in Slovakia returned to positive figures after three years at the beginning of 2017; but it remains dampened, in accordance with expectations, and thus, it has not been hampering growth of domestic consumption so far, which is strongly supported by a strong labour market. However, the growing domestic demand should also be reflected in inflation rates in the course of this year, and be demonstrated in a gradual speeding-up of demand inflation which could attack the cap of 2 percent by the end of 2017.

Inflation probably hit its temporary low in April, Koršňák wrote on May 15; frorm the next month, it is foreseen to return to the trajectory of a very mild acceleration. In May and June, mostly thanks to weakening basic effect in prices of fuels, by July the effect of last year’s reduction of gas prices will lose impact. However, demand inflation – under influence of growing household domestic demand – should gradually start accelerating inflation - all boosted by a strong labour market.

Unlike the last few years, the recovering consumption demand is not subdued by the secondary effects of decreasing energy prices which absorbed part of demand pressure on prices in the past.

Still, the acceleration of inflation is expected to be only gentle and gradual, according to Koršňák, and Slovakia will come close to the inflation goal of ECB – 2 percent – only very slowly.

Last months cooled expectations

The last two months have mildly lowered expectations of the future development of inflation, Tibor Lörincz, economic analyst of Tatra Banka wrote, adding that while the beginning of 2017 suggested that inflation could break the limit of 1.5 percent by summer, now it is estimated closely below this cap. The estimated average for 2017 remains without change, closely above one percent year-on-year, according to him.

Unlike Slovak inflation, the Eurostat estimate for the eurozone brought positive results, Lörincz added.

The bad news is that a large portion of inflation has been caused by growing energy prices. Inflation cleared of energy and food prices – as followed by the ECB – amounted to 1.2 percent.

Consumer inflation should be past deceleration now. In the next months, it should speed up in monthly comparison and in summer, it is expected to stabilise, Lörincz wrote. Despite this, y-o-y inflation shall accelerate mildly, as a result of basic effects.

The processing of personal data is subject to our Privacy Policy and the Cookie Policy. Before submitting your e-mail address, please make sure to acquaint yourself with these documents.

Topic: Economics


Top stories

Spectacular Slovakia #3: Unexpected hiking (Enjoy Bratislava's greenery) Audio

In Slovakia, you can hike in the capital city. Listen to the latest episode of our travel podcast to find out more.

The Financial Administration’s head resigns from post

František Imrecze says his decision was spontaneous.

František Imrecze

People will gather to support imprisoned Ukrainian filmmaker

The open letter in support of Sentsov has been signed by more than 2,800 people.

People hold posters to support Ukrainian filmmaker Oleg Sentsov, who is currently on hunger strike in a Russian jail to demand the release of the other Ukrainian hostages taken by the Kremlin, in front of the Embassy of the Russian Federation in Kiev on August 21, 2018.

Institutions can be quickly destroyed, but they are hard to build

Head of the To Dá Rozum intiative, Renáta Hall, talks about the impacts of a dispute between the academy of sciences and the Education Ministry.

Renáta Hall