Real economy and price development

September data spree will begin with a detailed 2Q GDP release. The flash estimate is rarely revised by more than one tenth of a point, so we expect the second estimate to be close to the preliminary estimate of 4.6% y/y. Judging by foreign trade data net exports were rather negative contributor to the growth, and household consumption likely virtually stagnated due to high unemployment. Therefore, investments especially inventories were the biggest contributor to the GDP growth, in our view. The Slovak statistical office will also release July industrial production, which is likely to be strong as the two car makers have shifted their holiday break to August from July, boosting thus July production at the expense of August figure.

Inflation remains still low by historic standards, although July inflation exceeded our forecasts due to higher food prices (which this time ignored favourable summer season). Bad harvest along with less favourable base is likely to push annual food inflation up in the coming months (e.g. while in January food inflation stood at -3.5% y/y, in July it reached 3.1% and is likely to increase further to around 6% by year-end). We expect consumer inflation to gradually increase towards 2% by the year-end.