Romania’s headline inflation remains around 1% y/y in March 2014

By bne IntelliNews April 11, 2014

Romania’s consumer price inflation eased marginally to 1.04% y/y in March from 1.05% y/y in February and 1.06% y/y in January, the statistics office reported. The average consumer prices in the past 12 months increased by 2.9% y/y, easing from the 3.2% y/y advance calculated a month earlier.

On a monthly basis, consumer prices edged up by a mere 0.03% with food prices increasing slightly more than 0.1% m/m and non-food prices as well as services’ fees advancing by 0.1% m/m.

MAIN DRIVERS. On the year, the food prices contracted visibly by 2.2% y/y amid lower end-user bakery prices following the VAT rate cut, but also due to the generally abundant crops last year. Non-food prices were up 2.5% y/y, possibly driven by the administered price hikes, while services’ fees advanced by 4% y/y partly in response to the 2.3% y/y rise in the price of the euro – used for pegging most services’ fees staring from telecom to international transportation fees.

CENTRAL BANK EXPECTS 3.5% Y/Y INFLATION. While headline inflation remains subdued on base effects after the bakery products' VAT cut last September, April will predictably bring some price hikes driven by the car fuel excise taxes and other energy price adjustments. Later in September, when the base effects fade, the annual inflation will predictably return to higher levels. The central bank expects end-year inflation at around 3.5% y/y, but independent analysts started recently questioning the target.

OTHER INFLATION METRICS. EU-harmonised consumer price inflation HICP edged up to 1.3% y/y in February from 1.2% y/y in January after ending at 1.3% y/y in December. For full 2013, the HICP inflation eased slightly to 3.2% y/y from 3.4% y/y in 2012. For comparison, the inflation calculated in the national methodology accelerated to 4% y/y in 2013 from 3.3% y/y.

CORE2 inflation calculated by the statistics office picked slightly up to 0.86% y/y in February from 0.75% y/y in January after the 0.71% reading at the end of last year. Adjusted CORE2, calculated by the central bank in order to take out from the basket items with more volatile prices, decreased marginally by 0.01% y/y in February remaining in the negative area for a fifth month in a row.

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