Slovakia’s annual headline inflation eased further in June to a two-and-a-half year low of 1.6% from 1.7% in May, data from the statistics office showed. The monthly inflation stood at 0.1% in June, the same as in May.

Food prices, which have a strong weight in the consumer basket, grew 1.1% m/m following a 0.7% monthly rise in May. On an annual basis, food prices increased 4.4% last month, at the same rate as in May.

The June annual core inflation eased to 1.7% from 1.8% in May.

For the first six months of 2013, consumer prices increased, on average, by 1.9% y/y.

IntelliNews Comment: Slovak average annual headline consumer price inflation slowed down from 1.6% in 2009 to an all-time-low of 1% in 2010 due to subdued demand during the economic crisis. With the revival of the economy in the beginning of 2011, inflation started to gain ground, driven up also by higher value-added tax and excise duties and by rising oil and food prices. The average annual inflation thus surged to 3.9% in 2011 and eased slightly to 3.6% in 2012.

The decline in inflation in the first half of 2013 is in line with our expectations and reflects subdued demand and cautious consumer spending in line with the economic slowdown. In view of the projected significant deceleration of Slovak economic growth (to less than 1% in 2013 from 2% in 2012) and no prospects of major price pressures, inflation is expected to remain subdued this year.