Croatia: May CPI hits new high at 6.4% y/y

Mon, Jun 16 2008, 07:21 GMT
by Alen Kovac

Erste Bank der oesterreichischen Sparkassen AG


  • · May CPI figures surprised on the upside, recording a robust 1.1% m/m increase, which brought the annual figure back to 6+% territory. The structure of the inflation figures remains unchanged. Food and non-alcoholic beverages contributed substantially, accelerating 1.5% m/m. Transportation prices, driven by gasoline price hikes (+5.7% m/m), added a further 2.7% m/m. Finally, clothing and footwear prices remained on their seasonal upward trajectory, contributing an additional 2.2% m/m.

  • · The CPI figures confirmed the persistent inflation pressures, which, given the current status on the global commodity markets, are likely to continue. Thus, supply-side pressures are expected to continue putting pressure on the overall CPI performance. Despite government measures to alleviate some of the pressure using short-term measures such as a selective hike of electricity prices, space for a significant moderating effect is rather limited. Lasting pressure on food and energy prices would likely trigger second-round effects on the other prices, thereby further fuelling the pressure. In such a scenario, keeping wages under control becomes increasingly important. So far, wage dynamics are showing stable growth. Hence, the higher inflation figures so far have not produced significant pressure on wages. Regarding the outlook for the rest of 2008, we still see potential for some moderation towards the year-end, as the base effect will unwind. We continue to expect average inflation around 6%, but still exposed to upside risk coming from the food and energy side

Published on  Mon, Jun 16 2008, 07:24 GMT

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