ECONOMY

January inflation jumps to an unexpected 4.4 pct

Inflation in January skyrocketed to a higher-than-expected 4.4 percent due to a massive jump in vegetable and fruit prices brought on by a spell of cold weather last month, data released by the National Statistics Service (ESYE) yesterday showed. The sharp increase in last month’s consumer prices, compared with 3 percent in December last year, came as other eurozone countries such as Germany and Italy also reported rising inflationary pressures. A flash estimate from Eurostat earlier this month put January annual inflation for the region at 2.5 percent, up from 2.1 percent in December last year. The European Central Bank in its monthly bulletin released on Thursday, however, predicted a decline in inflation in the coming months as past increases in energy and food prices start unwinding. Similarly, economists in Greece said the weather-related spike is not expected to last as they forecast a sharp deceleration starting this month. Calling it «an unfortunate start to the year,’ EFG Eurobank Ergasias economist Platon Monokroussos said consumer prices should see a sharp deceleration to 4 percent in February, with a more pronounced decline to 3 percent expected in May. Dimitrios Maroulis, economist at Alpha Bank, said «the artificial blip» in last month’s inflation reading is projected to disappear this month. He sees consumer prices falling by a near-percentage point to 3.5 percent in February on the back of good weather and declining oil prices. ESYE’s statistics showed the largest upward effect on January inflation came from vegetable and fruit prices, up 88.8 percent and 22.5 percent year-on-year respectively. Together with potatoes, the three items accounted for 0.6 percent of last month’s inflation figure. Monokroussos said that contrary to official denials, price rounding-up as a result of the physical introduction of the euro probably had had an impact on January inflation. But he added that the impact was difficult to calculate. A market survey conducted by the Development Ministry and presented on Thursday showed a majority of businesses had failed to keep to gentlemen’s agreements on not raising prices last month. The EFG Eurobank economist also pointed to the one-week delay in the launch of winter sales as another factor that exerted pressure on January consumer prices. Referring to core inflation, which excludes vegetables, fruits and oil, Monokroussos said preliminary indications pointed to an unchanged reading of 3.3 percent. Alpha Bank’s Maroulis, however, predicted a 10- to 20-basis-point hike, attributing it to the late start in the sales season. While declining oil prices and steadying vegetable prices are expected to relieve the pressure on inflation, the ongoing wage negotiations between umbrella trade union body GSEE and industrialists’ group SEV could prove crucial as to whether Greece could dampen inflationary pressures in the coming months. Trade unionists are asking for salary increases of 6 percent, seeking to make up for their restraint in the runup to eurozone membership. «It will be up to the government to convince trade unions that the January spike is temporary and a seasonal factor,» Monokroussos said.