The consumer prices of goods and services posted a monthly growth of 0.3 percent in July, a slight acceleration following two months of stability, the Statistics Office reported on Thursday. After four months of fluctuating closely above 2 percent, year-on-year (y-o-y) inflation accelerated to 2.6 percent in July.
The acceleration of inflation in Slovakia in July to 2.6 percent from the previous 2.1 percent was expected, with the base effect and higher-than-average rising prices of services contributing to it, economic analysts concurred in response to the latest data published on Thursday by the Statistics Office, adding that inflation is not expected to exceed 3 percent by the end of the year, but it may go above that level early next year.
"The rise in prices was expected, as core inflation pressures, which come from a tight labour market and rising salaries, have started to be seen more in the economy, while at the same time the base effect faded out," said Slovenska sporitelna bank analyst Marian Kocis. He pointed out that while inflation was mainly driven by energy and food prices last year, we are currently seeing a shift towards goods and services. As expected, food price growth has moderated significantly compared to last year, with a 1.5 percent year-on-year increase in July.
UniCredit Bank analyst Lubomir Korsnak pointed out that while the growth in prices of current goods is gradually slowing down, this trend doesn't apply to services. "Services inflation, fuelled by dynamic salary growth, remains deviated well above past levels. Although it is no longer accelerating, it is currently the main source of headline inflation - higher service prices explain more than 40 percent of headline inflation," he stated, adding that this is not true only for Slovakia.
According to Kocis, inflation pressures, caused by rising salaries and a tight labour market, will persist in the coming months. Thus, price growth should remain close to the current level or even accelerate slightly. "Households that benefit from real salary growth and higher savings rates are spending more. This increased household demand for goods and services also puts upward pressure on prices. On the other hand, households have started to save more and replenish savings. Since this money doesn't go into consumption, these new savings, in turn, have an anti-inflation effect," added the analyst, noting that he expects average inflation for this year to stand at 2.8 percent.
Source: TASR
