Consumer prices Slovakia edged down by 0.1% in February 2014, after staying flat the month before, statistics office data showed. On a monthly basis, the CPI index also fell by 0.1% in February, following a 0.2% rise in January.

Prices of housing, water, electricity, gas and other fuels, which have the strongest weight in the consumer basket, fell by 0.9% y/y in February, the same as in January. Prices of food and non-alcoholic beverages, which have the second strongest weight in the basket, shrank 0.3% m/m in February helping ease the annual growth of the component to 0.6% from 0.9% in January.

February’s annual core inflation was also negative at 0.1% y/y, while in January the statistics office registered a zero core inflation.

IntelliNews comment: Slovakia’s headline inflation has been easing gradually since November 2011. According to the central bank’s latest forecast, the low food prices and subdued domestic demand will lead to an end-year annual inflation of 0.5% in 2014 from 1.4% last year -  a much lower rate compared to 2012 (+3.6%) and 2011 (+3.9%), reflecting the weak demand, the moderate salary growth and cautious consumer spending amid the high unemployment. However, analysts from local commercial banks, surveyed each month by the central bank, expect the end-year inflation to reach 1.4% this year on recovering domestic demand. According to the finance ministry’s think-tank Institute for Financial Policy (IFP), the country is facing a 30% risk of deflation this year with the highest risk seen in the first quarter of 2014.