Analysts: Inflation in August accelerated, pushed up by rising phone call prices

Plane tickets also impact the development of prices.

When a customer makes calls, sends texts and uses data, the phone still communicates with the operator's mobile network.  When a customer makes calls, sends texts and uses data, the phone still communicates with the operator's mobile network. (Source: AP/TASR)

Inflation accelerated in August, and the price of phone calls increased more significantly, Ľubomír Koršňák, UniCredit Bank Czech Republic and Slovakia analyst pointed out in his reaction to latest inflation figures released by the Statistics Office. Year-on-year inflation in Slovakia amounted to 2.8 percent in August while month-on-month inflation stood at 0.2 percent.

“The main surprise was the relatively dynamic growth in the price of telephone and internet services, both for fixed and mobile networks, which rose by an average of 3 percent compared to July, and added one tenth to the inflation growth rate,” Koršňák wrote in his memo.

The development of other items in the consumer basket more or less mimicked expectations, with the dynamics of fuel price growth rising, the seasonal decline in food prices slowing down compared to the beginning of the summer, and demand inflation accelerating.

Slovenská Sporiteľňa analyst Katarína Muchová pointed to the increase in service prices that reflects an improving labour market situation and consequently a higher disposable income for households.

“In the case of food, we can see the basic effect of last year,” said Muchová.

Tatra Banka analyst Tibor Lörincz points to the increasing role of plane tickets in inflation. The growth of transport prices accelerated from 6.7 percent in July to 8.2 percent while the price of plane tickets increased by 23.4 percent month-on-month. Thus the plane tickets themselves increased inflation by almost one tenth.

“For analysts, plane tickets are the main item of inflation in 2018: they have experienced quite dramatic shifts in price over the course of the year and simultaneously their weight in the consumer basket for 2018 has increased.”

Outlook

Analysts expect that the annual inflation rate should slow down slightly in the coming months.

“We estimate that inflation will remain relatively stable up to the end of the year, with a slight decline in the year-on-year level of 2.6 percent,” said Lörincz. “However, we expect a change in the structure with the impact of oil prices on inflation getting weaker and the positive development of the economy and salaries in Slovakia should be reflected by higher prices for services. The average for 2018 should reach 2.6 percent.

Slovenská Sporiteľňa as well as UniCredit Bank Czech Republic and Slovakia expect inflation to reach 2.5 percent this year.

“The annual inflation rate should slow down slightly to 2.5 percent at the end of the year, especially due to the disappearance of the effect of the dramatic increase in the price of butter and later eggs,” said Koršňák. “At the very end of the year, or at the turn of the years, food prices could gradually begin to mirror the higher prices of cereals as a result of drought in Europe, especially in Western Europe.

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