Slovak consumer price inflation jumped in July, expanding to 1.4% y/y, according to data released by the statistics office on August 14.

The annual rate of expansion in the CPI was 0.4pp quicker than in June. On a monthly basis prices grew 0.1%, after remaining flat the previous month. The acceleration of the CPI in the seventh month of the year was heavily driven by food prices, but there are also signs that underlying demand-driven price increases are gathering pace.

The result is in line with others across the Visegrad region. Surging inflation around the turn of the year had showed signs of a slowdown recently, but while the momentum provided by oil prices and the low base from 2016 is fading, food price growth has quickened.

Slovakia’s headline inflation in July was pushed by a rise of 4.2% y/y in food prices, an effect of the chilly spring and a European shortage of butter. Transport prices gained 3%. Net inflation, which strips out erratic commodities prices, sped up by 0.2pp compared with June to 1.4%. That suggests the tightened labour market is now starting to produce significant demand-driven inflation.

“We suspect that the strong labor market is gradually being reflected in the development of prices on the market,” wrote analysts at the National Bank of Slovakia in early summer. However, they now warn that food prices represent an upside risk to the forecast, in which they predict only that CPI will rise by at least 1% this year.

Slovakia spent the last three years battling deflation, but escaped in December before the CPI pushed to 0.7%y/y in January. That accelerated to 1.2% in the second month of the year. Slovakia’s CPI gained 0.9% y/y on average over the first quarter. The July result leaves prices 1% higher across the first half of the year.