ECONOMY

Inflation at year low of 2.8 percent

Headline inflation in October dipped below 3 percent for the first time this year, marking a significant slide from the previous month, according to figures released by the National Statistics Service yesterday. The consumer price index last month fell to 2.8 percent year-on-year from 3.6 percent in September. Annual harmonized inflation in October also appeared to be losing steam, returning to January levels with a 3.2-percent figure against 4 percent in September. The wholesale price index in September slackened to 1.7 percent from 3.1 percent the preceding month. The inflation slowdown is welcome news for the government which has been trying to grapple with rising prices since the beginning of the year. The 2002 draft budget however underscores official optimism, with the private consumption deflator forecast at 2.9 percent this year and easing to 2.8 percent in 2002. The inflation deceleration echoed a eurozone trend. EFG Eurobank Ergasias economist Platon Monokroussos said the encouraging development could continue this month, with headline inflation further dropping to 2.5 percent. The continuation of favorable base effects, notably the impact of the reinclusion of the heating oil component, which is split between October and November, is expected to help contain inflation this month, he said. October headline inflation benefited from the sharp fall in petrol prices, down by 6.8 percent month-on-month, and heating oil, cheaper by 1.1 percent. Hotel expenditures also dropped by 2.6 percent, reflecting slackening demand in the industry. Fish prices fell by 2.8 percent, while fruit gained 6.4 percent, marking the biggest jump in the index last month. Monokroussos said persistently high core inflation, which excludes fuels, fresh fruit and vegetables, continues to be a source of concern. He estimated the Bank of Greece’s monitored core inflation eased only slightly in October, to 3.7 percent year-on-year from 3.8 percent in the previous month. Core inflation is projected to stay significantly above headline inflation in the next few months, he said, the result of structural rigidities in the system. The economist also forecast an upswing in December headline inflation to 2.8-2.9 percent as seasonal effects come into play. On average, inflation for 2001 is expected to end at 3.4 percent, as a result of the final quarter slowdown.