April inflation plunges down to 3.4 percent

Inflation fell at a much faster rate than expected, to 3.4 percent in April, the National Statistics Service (NSS) announced yesterday, leading economists to predict the deceleration could continue over the next few months. The sharp fall in consumer prices came after global oil prices eased back to more normal levels following the end of the war in Iraq and as Venezuela resumed production. Inflation spiked up to above-4 percent levels in the previous two months after bad weather gave rise to sharp hikes in fresh produce prices. Harmonized annual inflation also eased sharply to 3.3 percent last month from 3.9 percent in March but was still significantly higher than the eurozone estimate of 2.1 percent. Fuel costs were cheaper by 2 percent year-on-year in April and by 4.2 percent on a monthly basis, NSS statistics showed. Heating oil prices fell 19.4 percent month-on-month and 2.5 percent on an annual basis. The fuel drop slashed close to 0.6 percentage points off the headline figure. The inflation slowdown was better than the consensus forecast of 3.5-3.6 percent, said Platon Monokroussos, economist at EFG Eurobank. «It was due exclusively to the energy drop, more than offsetting the unfavorable base effect related to the payment of the Easter bonus in May last year,» he said. Service inflation, however, continued to hover at high levels, as hotel expenditure went up 6.9 percent month-on-month. Packaged tours were 13.6 percent more expensive this year than last year while the price of a haircut went up by 10 percent. Inflation should stabilize at the 3.3-3.4 percent level in the next few months, Monokroussos predicted. «We may see inflation in May and June settle at 3.4 percent. Consumer prices could soar again in the second half of the year as a result of unfavorable base effects,» he said. The government is targeting inflation of 3 percent at year-end. The persistent inflation differential between Greece and the eurozone is eroding Greek competitiveness, the European Commission warned last month. The Organization of Economic Cooperation and Development noted that inflation could stick at the 3.5 percent level in the next two years due to Greece’s strong domestic activity.

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