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Inflation quickens to 4.8% y-o-y in November


The consumer price index (CPI) amounted to 4.8% y-o-y in November, a notable acceleration compared with the previous month, the Central Statistical Office (GUS) reported. The result far exceeded market expectations, which averaged 4.4% y-o-y.

The highest price increase in the 12 months to November was recorded in transport, a category that includes car fuel (up by 11% y-o-y), followed by housing and energy (up by 6.9% y-o-y) and health (up by 6.4% y-o-y). Above-average price growth was also noted in education (up by 5% y-o-y). In food and non-alcoholic beverages prices went up by 4.6% y-o-y, in hotels and restaurants by 4.3% y-o-y, and in alcoholic beverages and tobacco products by 3.7% y-o-y. Recreation and culture and communication experienced low price growth in November (up by 1.2% y-o-y and by 0.8% y-o-y, respectively). As in the previous month, there was one category where prices declined compared with a year earlier, namely clothing and footwear (down by 1.6% y-o-y).

On a month-on-month basis the CPI was 0.7% in November.

In the first 11 months of 2011 consumer prices rose by 4.2% y-o-y.

The acceleration in consumer prices in November proved much sharper than anticipated. A lower comparative base is only a small part of the explanation; the key factor was a substantial depreciation of the zloty during the past few months.

The main contributors to the November spike in the consumer price index (CPI) were the prices of food, fuels, and health products and services. While it is normal for food prices to rise at this time of year, the surge in fuel prices was driven chiefly by the weaker zloty. Meanwhile, the sharp quickening of price growth in health products and services, and particularly in pharmaceuticals (up by a hefty 3.8% compared with October) was a consequence of the coming into force of new lists of reimbursed medicines effective from 16 November.

In our view, though a rising comparative base will exert a moderating pressure on consumer price growth in the coming months, its effect is likely to be largely neutralised by the weak zloty. (No substantial strengthening of the Polish currency is to be expected until the debt crisis in the eurozone is resolved). And there will be other inflation-boosting factors as well, namely an increase in electricity tariffs and a rise in the excise duty on tobacco products and diesel oil from January 2012. Therefore the CPI is unlikely to get back within the central bank’s target range of 2.5% y-o-y +/- 1 p.p. in the nearest months. According to our forecasts, a more pronounced fall in inflation will occur only in spring of 2012.

Paweł Sionko

Senior Economist

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