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Analysts: Inflation slows down due to cheaper air tickets

The development in consumer prices surprised analysts.

(Source: SME)

Inflation in May has surprised analysts, with the year-on-year consumer price inflation slowing down from 2.9 percent to 2.6 percent, based on data from the Slovak Statistics Office.

“The reasons for the more than considerable slowdown in annual inflation can be found in a correction for the increase in air ticket prices in April, the ongoing trend of the advanced clothing season and the faster-than-expected year-on-year growth in food prices,” said Ľubomír Koršňák, analyst with UniCredit Bank Czech Republic and Slovakia, as cited by the TASR newswire.

For the first time in a year the primary driving force of rising prices in Slovakia was not food and non-alcoholic beverages, said Slovak Farming Cooperative (SFD) analyst Eva Sadovská. While their price growth slowed to 4.5 percent in May, transport prices were higher by 5.5 percent in the same period.

Inflation in recent months has been significantly affected by air ticket prices. Their weight in the consumer basket has increased six-fold this year and the fluctuations in their price were also transferred to overall inflation.

“Price statistics were swung by air ticket prices in April, when they increased by 45 percent on a monthly basis, which was related to trips around Easter,” said Juraj Valachy, analyst with Tatra Banka. “In May, prices fell by almost 27 percent, meaning that their year-on-year growth reached 8 percent, which is an understandable level given growing oil prices.”

Food prices also significantly contributed to the year-on-year inflation slowdown, going down by 0.2 percent compared to the previous month. In the past, food prices have generally increased in the fifth month of the year.

“The diametrically different development this year was necessarily reflected in the dynamics of the year-on-year growth in food prices, which slowed from 5.8 percent to 4.5 percent,” said Koršňák.

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