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Slovakia: March CPI Inflation

Tue, Apr 14 2009, 09:39 GMT
by Mária Valachyová

Erste Bank der oesterreichischen Sparkassen AG

Inflation slowed down in March to 2.6%, more than expected

• Inflation continued in declining course through March, however, deceleration from February's 3.1% to 2.6% in March was steeper than was expected (our estimate stood at 3.0% while market's average at 2.9% y/y).
• On monthly comparison, consumer prices declined by 0.2%, owing to decline in prices of both goods and services. Contrary to our expectations, prices of food declined by 0.8% m/m, while we expected broadly unchanged food prices in March (lower prices of milk and milk products contributed the most towards the monthly decline). Among services, e.g. recreation and culture were cheaper than in February, likely owing to both cheaper neighboring currencies and ongoing recession in the Euro area.
• Inflation continues in sliding tendency since last September, following the broader European (as well as global) trend. Reasons for declining inflation include the fact that steep food price growth from last year has not repeated. Secondly, ongoing recession in the Euro zone reduces purchasing power of households and thus eliminates demand inflationary pressures. In addition, depreciation of neighboring currencies lowers imported inflation or puts pressure on margins of local sellers. We expect (national) inflation to continue declining in the course of the year to below 2 % y/y.
• Based on today's data, we expect March harmonized inflation at 2.0% y/y as compared to our previous forecast of 2.2% (in February, HICP stood at 2.4% y/y).

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Published on  Tue, Apr 14 2009, 09:42 GMT