Romanias April CPI accelerates to 8.3% y/y.

By bne IntelliNews May 11, 2011
Romania's consumer price index increased by 8.3% y/y in April after an 8% y/y annual advance in March, the statistics office reported. The consumer prices increased by 0.66% m/m in April alone. The average price index for the past 12 months ending in April increased by 7.2% y/y, compared to a 6.8% y/y hike, calculated a month earlier. We recall that the central bank adjusted its yearend annual inflation projection upward to 5.1% y/y, while the IMF warned that the monetary authority might revise its policies next year after failing to meet the 3% +/-1pps target in 2011. The favourable base effects of the VAT rate hike last July will help disinflation in H2, but the consensus projections have been recently revised to almost 6% y/y yearend inflation. In terms of commodity groups, the prices of food surged at above-average rates over the past six months. Thus, they marked a 10.9% y/y growth in April, compared to a slightly lower 7.7% y/y hike of non-food prices and a much slower 4.8% y/y rise of services prices. These dynamics reveal that the tight household budgets turned the purchase of food into a priority. The prices of non-food goods increased below the average despite the record rise in fuel prices over the past year. The prices of services, highly dependable on the buyers disposable incomes, have increased at the slowest rate, actually decreasing in real terms. IntelliNews Comment: Independent analysts argued that the current inflation is partially the result of the central bank's decision to raise the monetary aggregates during the economic expansion and not adjusting them accordingly during the economic contraction. Nonetheless, the broader monetary aggregates are hardly under the control of the central bank since the Net Foreign Assets accounted for half of M3 in 2006, remaining at a high share for the economic expansion period and shrinking only with the arrival of the economic recession, when they had to be replaced with public-driven Foreign Assets under multilateral agreements.
Consumer, Producer Prices (%, y/y)
2008* 2009* 2010* Dec-10 Jan-11 Feb-11 Apr-11
CPI 7.8% 5.6% 6.1% 7.0% 7.6% 8.0% 8.3%
Food 9.2% 3.3% 2.3% 7.2% 8.8% 9.9% 10.9%
Non-Food 6.4% 6.2% 9.8% 7.2% 7.3% 7.4% 7.7%
Services 8.6% 9.0% 4.8% 5.9% 6.0% 5.7% 4.8%
Source: INS *annual averages

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