The signal forecast that the National Institute of Statistics announced indicates a record growth rate of 8.8% in the third quarter of 2017 on the… Mai mult›
Before deciding to protect the stability of interest rates more than the stability of the exchange rate and to signal, though, a future increase in… Mai mult›
The distrust regarding the health of Romania’s economic growth makes foreign analysts remember that the last time when Romania outpaced China in terms of the… Mai mult›
An abnormality that has reached its potential: Depopulation does not help too much GDP/capita growth
The data published by Eurostat on the evolution of GDP per capita over the period 2005-2015 show that the growth rate of this key indicator… Mai mult›
Document / Where is money that Government is trying to squeeze out of private sector: 36% of debts are in state-owned companies. And PSD
A total of 10 state-owned companies or owned by the public administration account for over 36% of the total outstanding social contributions at September 30,… Mai mult›
de Marin Pana , 12.11.2017
According to the data provided by INS, Romania recorded a 1.28% increase in prices in October 2017 compared to the previous month, the highest increase in the last five years (a similar value has not been registered since January 2013).
The annual inflation rate increased sharply, on an accelerated trend, from + 1.15% in August to + 1.77% in September and + 2.63% in October.
The most significant direct contribution to this trend was the 6.94% increase in electricity prices, which along with the 3.47% increase in fuel prices (both groups with important shares in consumer price basket) generated almost 55% of the exceptional value of monthly inflation.
Unfortunately, the predictable return of volatile commodity prices overlapped this evolution, prices that allowed (due to the seasonal decrease) a temporary stop in August in the increasing trend of inflation and the masking of tensions. Specifically, the price of vegetables and canned vegetables went up by 6.67%, the price of fruits and canned fruits by 2.54% and the price of eggs by 6.63% (incidentally, much less than in the Western countries affected by the pesticide contamination scandal).
It is noteworthy though that the cumulative influences of these volatile prices on the overall CPI represented 0.32% of 1.28% (exactly one quarter, with 0.22% from vegetables, 0.06% from fruits and only 0.04% from eggs), much below the effect of 0.44% (exactly one third) generated by the electricity and comparable to 0.29%, resulted from the fuel price increase (we do not get back to the excise duty increase, which has been added to the rising world prices).
The good news (in the given context) is that more than 80% of the monthly price increase has been conjunctural and WILL NOT REPEAT in the immediate future. It is also the explanation for the 2.7% annual inflation forecast provided in BNR’s analysis for the end of this year. The less good news is that nearly 20% of October inflation is spread across commodities and services, and this component resists much more in the medium term.
The best examples are the meat and meat products (+ 0.51% but with a very significant share in the consumer price basket) or milk and dairy products (+ 1.07%) in the food category, as well as footwear (+ 0.75%) or clothing (+ 0.44%) in the non-food category. This does not exclude the tariffs of services such as those provided by cinemas, theatres, museums (+ 0.50%), restaurants, cafes and canteens (+ 0.41%) or the rents (+ 0.32%).
Somewhat paradoxically in this picture of the general price evolution, the decrease in the telephony tariffs calculated in relation to the European single currency (local currency RON slightly appreciated in October), had an effect toward the CPI decrease, due to the value of -0.19% recorded by INS, which contributed to a somewhat stranger distribution within the service category, in relation to the service inflation theory (only 0.16%, that is, exactly one eighth of the CPI).
Getting back to the above-mentioned “diffuse inflation” for food and non-food products, a bit spectacular but insidious with the increase of incomes, after the developments in the foreign exchange market, the question that arises is whether we reached a point where prices tend to maintain stable although not expressed in RON but in euro.
In case of an affirmative answer, a clear correlation is sufficient. Which may seem logical because we are dealing with the production of goods and services in Romania but not necessarily Romanian. With accounting operations that are seen at the level of a multinational group in euro, not in RON; multinational group to which nominal salary increases of + 1.5% in lei could be described as funny in the context of the inflation estimated for 2018.
- Price index evolution in October 2017 compared to the previous month
- Total CPI
- Total CPI exclusively alcoholic beverages and tobacco
- Total CPI exclusively fuels
- Total CPI exclusively products with regulated prices
- Total CPI exclusively vegetables, fruits, eggs and products with regulated prices
- Total CPI exclusively vegetables, fruits, eggs and products with regulated prices, beverages and tobacco (CORE 2)
Technically, the situation is far from being as serious as it may seem if approached emotionally or from a strictly arithmetical approach. The CORE 2 indicator is witness to that, the indicator followed by the monetary policy. This indicator is clearly higher in the last two months than in the first half of the year, but does not look problematic at all, especially in the context that despite the price hikes in October, it remained almost unchanged (+0.37% versus + 0.35%), so we have the capacity to manage such situations.
The problem is, rather, how we shall manage the situation from the expectations’ perspective and how we will be able to keep calm with an increase that may seem high in prices but is generated by something very abstract for most of the population, such as the base effect.
That is, from November 2017 until March 2018, just the very low monthly inflation levels of the previous year (resulting from the fiscal policy) will push toward a temporary inflation peak. Which no longer has a significant increase potential in mid-term (see the level of 3.2% for the end of 2018 and the decrease to 3.1% estimated by BNR’s analysis for September 2019, the maximum forecast range).
- Evolution of inflation in the last 12 months
- CORE 2 adjusted
- Annual inflation
For now, the AVERAGE inflation rate for the last 12 months maintained at + 0.7% according to the national methodology and increased to + 0.6% according to the harmonized HICP index at the EU level. Further, the relatively low levels of inflation in the previous year will be replaced by higher levels in the coming months and the average annual average inflation will tend toward to the annual inflation of the moment.
For now, prices in 2017 were below 2013
To position ourselves correctly on the turbulent events of the past four years in terms of tax and salary changes, it may be useful to recall the evolution of the annual average inflation to date (the one that shows the process over time and not the picture of the moment for the annual inflation that results from the ratio between a particular month to the corresponding month of the previous year).
- * mobile average of 12 months at the level of October
*To the surprise of those who may have forgotten that they have benefited from significant price cuts in the recent past, we mention that statistical data of INS show that we are STILL (of course, on a different structure) BELOW THE AVERAGE PRICES IN 2013. Most likely, at the level of the whole year, we can talk about a certain increase in prices (within the theoretical recommendation of 2% plus/minus something or 2.5% plus/minus 1%, customized for Romania), only in 2018.
That is, if we make the right decisions, we have the chance to stabilize our economic indicators to values that ensure the macroeconomic stability. Fortunately, as the title of a famous movie says, “The postman always rings twice”. However, if we do not answer, the postman may not ring the third time. We all know why the postman rings the doorbell.
Lăsați un comentariu
Rompetrol saga, chapter about money: Government asks KazMunaiGaz to pay the historical debt and demand settlement of case in court
The extension of the memorandum between the Romanian state and KazMunaiGaz, the owner of the Rompetrol Group, will be discussed only after the company's historical… Mai mult›
"Not only we have not died, we rank third in the world" - Government approved second budget amendment, deficit of 2.96% of GDP
The second budget amendment this year has been adopted at the government meeting on Wednesday. As the Finance Minister assures, this amendment is "positive", the… Mai mult›
Mayors accepted on Tuesday in the negotiations with Prime Minister Mihai Tudose and several cabinet members, the promises made by the government officials to partially… Mai mult›
The establishment of own companies by local administration to manage the services at the local level is worrying for the competition authority, Bogdan Chiritoiu, President… Mai mult›
The ruling coalition registered with the Chamber of Deputies on Tuesday the draft amendments to the three important laws for the judicial system: Law 303/2004… Mai mult›
Negative opinion and analysis of Fiscal Council on tax changes. "Tax package" costs 5.2 billion, not planned at all
The Fiscal Council issued a negative opinion on the proposal to amend the Fiscal Code, according to the opinion published Friday on the institution’s website.… Mai mult›
The Economic and Social Council, a consultative body of the Parliament and the Romanian Government, issued a negative opinion on Tudose cabinet's draft amendment to… Mai mult›
Romania ranks 45th in the Doing Business 2018 ranking by the World Bank (WB), with a total score of 72.87 points, right under the Republic… Mai mult›
Regarding the EUROSTAT release on Romania’s budget deficit in the second quarter of 2017, the Ministry of Public Finance (MFP) has issued a press release… Mai mult›
Trade Winds: US broadens economic cooperation base with Romania: most US companies coming to Bucharest are SMEs
SMEs are the most numerous among the over 100 American companies participating in the Trade Winds mission launched in Bucharest by the US Department of… Mai mult›
Government introduces a tax on jobs: 2% on salary fund for employers. Finance Minister says EU forces us to do so
Finance Minister Ionut Misa announced on Wednesday evening in an interview for Antena3 that the Government will introduce a "solidarity tax" applied to employers, depending… Mai mult›
Shareholders of Transgaz national gas carrier will provide information on the conclusion of an EUR 50 million loan agreement with the European Investment Bank… Mai mult›
European Commission’s announcement to Government and Parliament: Gas transactions market cannot be monopolized by OPCOM
Romania risks the infringement procedure if the Parliament adopts definitive amendments to the Emergency Ordinance 64/2017 on the natural gas market, which provides for the… Mai mult›
The Ministry of Finance (MFP) placed euro bonds worth EUR 1 billion on the foreign market by reopening the issue with the maturity of 10… Mai mult›
Ford launches production of EcoSport in Craiova. Total investment in Romania reaches over EUR 1.2 billion
Ford officially launched the production of the EcoSport SUV at the plant in Craiova, raising total investments in Romania to about EUR 1.2 billion, since… Mai mult›