ECONOMY

Spring rains send inflation up to 3.8 pct

Headline inflation unexpectedly flared up to 3.8 percent in May after a respite in the previous month, as rainy weather pushed up the prices of fruit and potatoes, data from the National Statistics Service yesterday showed. Economists said the inflation spike was circumstantial and that consumer prices should ease off in the coming months. Winter storms were principally responsible for a sharp jump in fresh produce prices in February and March, sending inflation soaring to 4.3 percent and 4.1 percent respectively. Dimitrios Maroulis, an economist at Alpha Bank, was caught off guard by the inflation hike in May as his projection had been for a lower number stemming from favorable base effects. «We had been looking for a decline in May based on this year’s earlier celebration of Easter and price increases last year due to the euro changeover,» he said. He said the May inflation spike was «due solely to higher fruit and vegetable prices caused by heavy rains in that month, which accounted for 0.95 percent of the consumer price index.» The inflationary pressure should lessen over the summer judging from the sharp fall in core inflation, said Maroulis. «Core inflation, which strips out volatile fruit and vegetable prices as well as the fuel factor, eased to 2.9 percent in May from 3.4 percent in the previous month,» he said. This could herald a decline in headline inflation to 3.5 percent this month and a gradually easing to 3 percent by August, Maroulis forecast. In tandem with the headline inflation spike, harmonized annual inflation rose to 3.5 percent last month from 3.3 percent in April, nearly double the eurozone’s 1.9 percent estimate. «Price pressures are likely to remain in Greece as long as its economy continues to outpace its eurozone partners,» said Giorgos Spais, economist at Deutsche Bank. He said Greece is keeping company with Ireland and Spain, countries with high growth rates and above-average inflation. Greece is targeting 3.8 percent economic growth this year, a figure that appears well within its reach based on robust first-quarter expansion of 4.3 percent. The eurozone stood on the brink of a recession in the first quarter. Economists said the eurozone economy is expected to see growth of around 0.7 percent this year.