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Inflation slows to 4.6% y-o-y in December


The consumer price index (CPI) amounted to 4.6% y-o-y in December, a slight deceleration compared with the previous month, the Central Statistical Office (GUS) reported. The result was broadly in line with market expectations.

The highest price increase in the 12 months to December was recorded in transport, a category that includes car fuel (up by 9% y-o-y), followed by health (up by 8% y-o-y) and housing and energy (up by 6.7% y-o-y). Above-average price growth was also noted in education (up by 4.8% y-o-y) and in food and non-alcoholic beverages (up by 4.7% y-o-y). Prices in hotels and restaurants went up by 4.4% y-o-y and in alcoholic beverages and tobacco products by 3.4% y-o-y. Low price growth was reported in recreation and culture (up by 1% y-o-y) and in communication (up by 0.8% y-o-y). As in the previous month, in one category prices declined compared with a year earlier, namely clothing and footwear (down by 2.1% y-o-y).

On a month-on-month basis the CPI was 0.4% in December.

In January-December 2011 consumer prices rose by 4.3% y-o-y.

In our view, the slowing of inflation in December was primarily a statistical effect caused by a higher reference base from last year. Although a rising base of comparison will exert a moderating pressure on consumer price growth in the coming months, its effect is likely to be largely neutralised by the continued weakness of the zloty (though the Polish currency strengthened visibly in the closing part of January). 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 NBP’s target range in the nearest months. According to our forecasts, a more pronounced fall in inflation will occur only towards the end of the second quarter. We predict that in 2012 as a whole the average annualised CPI will be 3.3%.

Paweł Sionko
Senior Economist
PMR Publications

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