Romania’s industrial price price index increased by 0.7% m/m in August, and its annual increase accelerated to 4.1% y/y from 3.0% y/y in July, the statistics office said on October 3. 

Energy prices made the steepest increase on both a monthly and an annual basis, while the less volatile prices of consumer, durable and capital goods kept rising steadily, at rates between 3.4% y/y and 3.8% y/y in the month.

Energy prices and the weakening of local currency are the two main drivers that keep pushing up industrial production prices, beside the rising labour cost. Romania's working day adjusted hourly labour cost rose 18.6% y/y in the second quarter of the year, data from the country’s statistics office showed on September 5. 

The prices of energy goods increased by 2.0% m/m in August and by 4.9% y/y compared to last year.

From a broader perspective, while the overall industrial price index has been pushed up and down in recent years by the volatile energy prices, the sub-indices of consumer, durable and capital goods' prices keep rising constantly. 

The industrial production price of consumer goods increased by 3.4% y/y in August, the prices of durable goods by 3.8% y/y and the price of capital goods by 3.5% y/y. This results in supply-side inflationary pressures on the consumer prices, which add to the significant supply-side factors. 

The central bank mentioned at its October 3 monetary board meeting an imminent upward revision of its August inflation outlook. The central bank has already raised its yearend inflation forecast for this year by 0.3pp to 1.9%, mentioning bleaker energy prospects generating further risks. The CPI inflation rate should accelerate to 3.2% at the end of next year.

The prices of intermediary goods increased at the sharpest rate: 4.4% y/y in August. This was partly caused by the exchange rate dynamics, since the local currency slightly weakened in the month along a medium-term trend. This was visible in the dynamics of the prices for the goods traded on foreign markets: 5.4% up y/y in August, versus a 3.5% y/y average increase in the prices of the goods traded on the local market.