Slovakia – September

Major economic indicators 

Industrial production in June exceeded expectations, coming at 6.4% y/y. Our forecast for July, matched by the whole market consensus, expects IP to have retained the dynamic growth rate, and even accelerated slightly to 6.8% y/y. Sentiment in the industry is rather volatile, however, as seen in the lower industrial sentiment indicator for July. Almost immediately though, an improvement in the sentiment followed in August. 

Low oil prices coupled with the ensuing lower energy prices are still the main reason for the lack of inflationary pressures in the Euro Area. Flash estimate shows that annual inflation in the Eurozone remained unchanged in August, at 0.2% y/y. August is thus the third month in a row that saw inflation at 0.2% y/y. Slovakia still experiences mild deflation - consumer prices even fell by 0.1pp to -0.2% y/y in July. We expect this trend to have continued in August and expect -0.2% y/y CPI and -0.3% y/y HICP inflation. Inflationary pressures are still largely absent and given the recent announcement of a 3.91% cut in gas prices from 1st September, the situation is unlikely to change in the near future. Inflation is likely to remain subdued until the end of the year (EOY inflation could stand at 0.3% y/y) and the overall 2015 average is expected at -0.1%. 

Producer price decreases have been fairly stable over the past few months. We expect a similar rate of change to have prevailed in August and estimate a 4.2% y/y decrease in producer prices.