Bulgaria’s domestic market PPI falls 2.9% y/y in December, averages -1.3% in 2013

By bne IntelliNews January 30, 2014

Bulgaria's producer price index (PPI) on the domestic market dropped 2.9% y/y in December 2013, softening from a 4% decline in November, statistics office data showed. The average PPI decrease in full-2013 stood at 1.3%, versus a 5.3% increase in 2012 as the indicator fell in eight months last year mainly due to cheaper food, chemical and energy products, basic metals, iron ore and coal. On a monthly basis, the PPI remained unchanged for the second month in a row in December. 

Prices of manufacturing output fell 0.8% y/y in December, weighted down by lower prices of food (-4.2% y/y), chemical products (-5.6% y/y), basic metals (-6.1% y/y), electrical installations (-1.5% y/y) and motor vehicles [autos excluded] (-2.1% y/y). Electricity, heat and gas prices fell 5.1% y/y.

Bulgarian agricultural producers have said that the extraordinary warm October, November and December have not had a negative influence on their crops and currently there are no reasons to expect bad yields because of the unseasonable weather conditions. Meanwhile, the price of electricity is unlikely to drop further this year after the state regulator cut it last in January.

Producer prices in the mining and quarrying sector dropped 12.1% y/y in December. Metal ore charges decreased 19.4% y/y and the price of coal was down 6% y/y, influenced by the global supply and demand dynamics of these resources. 

The price of iron ore is expected to drop in 2014 as supply from international mining giants is expected to increase - new capacities at Australia's Fortescue and the British-Australian corporation Rio Tinto should become operational in the second half of the year. Moreover, demand from the biggest consumer of the resource, China, is seen dropping due to rising borrowing costs in the Asian country. Meanwhile, the price of coal is also seen declining this year because of the increased use of natural gas due to the advances in horizontal drilling and hydraulic fracturing.

The broader PPI index (sales abroad included) decreased 2.9% y/y and 0.2% m/m in December.

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