SIMILAR ARTICLES

Romania’s economy – ranks 16th in EU: We surpassed Greece

  Romania’s economy ranks 16th in the European Union and represents 1.23% of the EU economy, according to the data published by Eurostat for 2017,… Mai mult

OUG on Public Private Partnership – adopted. New things

The Government adopted on Thursday the emergency ordinance on public-private partnership (PPP), which amends previous regulations. The law from 2016 remained inapplicable because “ implementing… Mai mult

“They say what popular vote wants, we say what economy can do”: BNR increases key interest rate

The National Bank of Romania (BNR) surprised a part of the market on Monday with the decision to raise its monetary policy rate to 2.5%… Mai mult

Monthly trade deficit surges again over one billion euro

The trade deficit in March 2018 exceeded again the threshold of EUR 1 billion after the values in the first two months were significantly lower.… Mai mult

Attention, manufacturing industry – ranks last in terms of increases: Record average salary in March. Net 581 euro and 1,157 euro in terms of purchasing power

  The national gross average salary announced by the INS for March 2018 was 4,488 lei, 8.7% higher than in the previous month. Net nominal… Mai mult

Inflation? Some statistics: What fuelled, in fact, price increase in March 2018

de Marin Pana , 7.5.2018

More than half of the annual inflation rate in March 2018 (which went up to 4.95%) was the result of commodity and commodity price increases in the consumer basket which had prices administered or heavily influenced by indirect taxation (through excise duties), according to an analysis by INS.

As an order of magnitude of the influence on the consumer price index, the most important developments in this respect were in the fields of electricity, fuels and tobacco products, all with relatively large shares in the consumer basket based on which inflation is calculated, followed by natural gas and the eternal, discreet but persistent price increase in water supply and sanitation services

(see chart:).

*

  • More than half of the annual inflation rate in Mach 2018 is generated by components with administrated prices or strongly influenced by indirect taxation (excises)
  • Contributions to annual inflation rate – March 2018, percentage points
  • Electricity        Fuels   Tobacco          Natural gas      Water supply and sanitation

*

Spark – lit by components from outside the scope of monetary policy

All in all, we faced the situation where about two-thirds of the annual inflation rate recorded at the end of the first quarter of this year was found in the so-called “exogenous components”, placed from the technical point of view outside the monetary policy’s sphere of influence.

Besides the groups that are important in terms of share in consumption, presented above, major influences came from the so-called VFE group (abbreviation of vegetables-fruit-eggs) of the volatile prices.

Although these products do not have very high shares in the consumer basket, they still show very large price percentage changes throughout the year (see the famous potatoes case…) depending on seasonal factors, production and/or temporary stocks or even special situations such as the scandal in the West about the contaminated eggs. (see chart).

*

  • Two-thirds of the annual inflation rate in May 2018 – explained by exogenous components (placed outside the monetary policy’s sphere of influence)

*

Shocks and their implications

A series of sudden price changes in the second half of last year and the first month of 2018 had a strong influence on the advance of the consumer price index calculated against the same month of the previous year, up to 4.95%.

The signal has been launched, with an influence of a half-percent contribution to this value, by the first round of the increase in the excise duty on fuels (see chart :).

*

  • A series of shocks on the offer side occurred in the last 12 months* significantly contributed to the annual inflation rate in March 2018

*

The electricity price increase and the effect remained from the increase of the excise duty on fuels led afterwards, in October 2017, to the highest increase level (1.3%), completed (an unfortunate coincidence) up to the level of two percentage points following the egg crisis and the increase in oil prices, internationally.

Finally, the increase on January 1, 2018, in electricity and natural gas prices added an extra 0.8 percentage points to the annual inflation.

That raises, again, the question of when these price increases are applied, naturally felt more acutely in the winter months, when energy consumption is higher.

Conclusions

Obviously, it is not a question of making all the price increases in the last 12 months attributable to these factors – there are others as well, more complicated, on which we have drawn the attention many times over the last year and to which we shall get back.

However, it cannot be overlooked that these developments have amplified a phenomenon that would have had an entirely different levels, much lower than the 5% threshold that has been almost reached.

The good news in this context is that the inherent disappearance of these factors (after the once produced basic effect will dissipate, it will be difficult to produce again the same increases in 2018) will be able to calm down the general price increase and gradually drive it to a more sustainable level for the purchasing power related to the population’s incomes.

Mergeți în homepage ›

Publicat la data de 7.5.2018

Lăsați un comentariu


NEWS

List of black payments / Corruption in health sectors: Bribes - 25% of contract value, higher than in other fields

Romania is the European country with the lowest spending in the health sector. However, DNA statistics show that the bribe in this field is higher… Mai mult

Finance Ministry analyses tax codes, article by article, to amend them again

The Tax Code and Fiscal Procedure Code will be amended by the end of this year with a "fair and logical" approach without "populist" initiatives,… Mai mult

Klaus Iohannis - fined by Anti-Discrimination Council with 2,000 RON for using word "offenders"

President Klaus Iohannis was fined with 2,000 RON by the National Council for Combating Discrimination. CNCD President Csaba Astalosz says though he disagrees with the… Mai mult

Multinationals in Romania: home countries and preferred domains

Romanian businesses control only 6.8% of the 78,181 groups of companies in Romania. There have been 78,181 groups of enterprises identified, out of which 5,311… Mai mult

London Stock Exchange opens a Service Centre in Bucharest with 200 employees

The London Stock Exchange Group (LSEG), the operator of London Stock Exchange, announced that it will open a business services centre in Bucharest through the… Mai mult

NATO largest exercise in Black Sea in 2018: More than 2,300 troops from seven countries participate in Sea Shield 18

21 military ships, 10 combat aircraft, and a submarine participate between May 4-11 in Sea Shield 18, the largest NATO exercise organised on the southern… Mai mult

"Emergency constitutional support": President Iohannis sends laws on judiciary to Venice Commission and asks Constitutional Court to wait for the answer

President Klaus Iohannis announced on Wednesday that he is referring to the Constitutional Court of Romania the Parliament's amendments to the three laws on the… Mai mult

IMF revised upwards Romanian economic growth in 2018, from 4.4% to 5.1%

The International Monetary Fund (IMF) has revised upwards the Romanian economy growth forecast for this year, from 4.4% to 5.1%, according to the latest World… Mai mult

Company insolvency, set on an upward trend in 2018, caused losses of RON 9.6 billion in 2017: ONRC statistics

The number of companies and authorized natural persons (PFA) which have declared insolvency increased by 19.31% in the first quarter of 2018 compared to the… Mai mult

Romania officially started negotiations with Mafia on Thursday. Criminal Law based on which there would be no Colectiv, Hexi Pharma, TelDrum, abusive retrocessions files anymore

Proposals to amend the Criminal Code started to be debated on Thursday at the Special Committee on the Laws on the Judiciary headed by former… Mai mult

Prime Minister Netanyahu's personal doctor, appointed as honorary adviser of Viorica Dancila

Herman Berkovits received in May 2014 the Key to the City from Mayor Sorin Oprescu Herman Berkovits, the personal doctor of Israeli Prime Minister Benjamin… Mai mult

Industrial production, up 7% in first two months of 2018, compared to the same period of last year

Industrial production (gross series) was up 7% in the first two months of 2018 compared to the same period in 2017, following the growth in… Mai mult

Deloitte study: Romania vs. EU - Tax rules applied to losses from selling bad loans

Deloitte Romania, at the request of the Romanian Banking Association, conducted a study for analysing the tax treatment of the sale of receivables and the… Mai mult

Transgaz, favourite to take over Greek natural gas transport operator

The US and the EU support Transgaz-Reganosa (Spain) offer to take over the Greek natural gas transport operator DESFA, for geopolitical reasons, the Greek media… Mai mult

Workforce (i)mobility: Unemployed young Romanians are not willing to move to another locality for a job

Romania has one of the highest percentages of young unemployed people who would not leave their hometown to find a job (either in the country… Mai mult