ECONOMY

The consumer price index slides in August, but core inflation still a worry as winter approaches

Greece’s annual inflation rate receded to 2.7 percent in August from 2.9 percent in July, according to data from the Greek National Statistics Service (NSS) released yesterday. NSS General Secretary Manolis Kontopyrakis projected the average monthly inflation rate to reach about 3 percent by the end of the year, against previous estimates of 3.5 to 3.8 percent for the current year. According to Kontopyrakis, the seasonal summer sales had a dampening effect on prices. On a year-to-year basis, harmonized inflation, the rate used by the European Union to calculate the eurozone average, also eased in August, to 2.8 percent, in comparison with 3.1 percent a year earlier. In spite of easing inflationary pressures, core inflation – that is, excluding energy and fresh produce prices – remains a source of relative concern. Despite retreating from 4.1 percent in July to 3.5 percent in August, it is considered a strong enough indication of continued upward pressures on the prices of goods and services in coming months. Developments in core inflation are also the cause of concern expressed by the Bank of Greece regarding its impact on the overall consumer inflation rate. Inflation for the 12-month period, between September 2003 and August 2004, averaged 2.9 percent, against 3.6 percent for the preceding 12-month period. Month-on-month, the consumer price inflation index fell 0.2 percent in August, compared to July, against a zero rate from July to August 2003. On an annual basis, the fall of prices in August was due to the reduction, by 0.71 percent, of the prices of fresh fruit and vegetables, as well as due to the drop in telephony rates, with all other goods and services becoming more expensive. Kontopyrakis said that price developments in school-related items and private school and institute fees will be critical for inflationary pressures in September. He insisted that it is illogical for school fees to be rising when competition in the private education market is becoming more intense and while the country is suffering from a demographic problem, meaning that fewer children attend school each year. Experts say consumer price index developments in the fourth quarter will depend upon the energy – mainly oil – and fresh produce price outlook.