June inflation slightly higher

Greece’s consumer inflation edged up in June, in line with market forecasts, on costlier fresh produce, cigarettes and restaurant prices, with economists expecting a further acceleration in coming months. The consumer price index rose 3.2 percent year-on-year in June compared with a 3.1 percent pace in May, the National Statistics Service (NSS) said yesterday, in line with a mid-range forecast of 3.2 percent in a recent Reuters poll. EU-harmonized inflation, the figure used by the European Union to calculate its overall rate, accelerated to 3.4 percent in June from 3.3 percent in May, almost a full percentage point higher than the eurozone’s average of 2.5 percent. Greek inflation has long outpaced the eurozone’s average, with opinion polls consistently citing high inflation and unemployment as Greeks’ main economic worries. The inflation differential poses risks to economic competitiveness. «The June CPI figure… is a positive development given increasing cost-push pressures from higher commodity and oil prices and the adverse base effect over the first four months of the year due to a value-added tax (VAT) rate hike in June 2005,» said economist Platon Monokroussos at EFG Eurobank. Inflation in the first half of the year slowed from the year-earlier period based on the latest data, said Manolis Kontopyrakis, secretary-general of NSS. «The average rate for the first half of 2006 was 3.2 percent compared with 3.3 percent in the year-earlier period. EU-harmonized inflation was 3.27 percent in the first half versus 3.3 percent previously,» he told reporters. But economists expect price pressures to accelerate in the second half of the year. «The inflation rate will hover between 3 and 3.5 percent in the second half because of high wage increases exceeding productivity gains,» said economist Theodor Schonebeck at Deutsche Bank. «Also, commodity and oil prices have not worked through fully yet despite recent corrections.» Inflation is expected to hit 3.4 percent in July on the back of higher energy costs, said Kontopyrakis. Athens is targeting an average inflation rate of 3.2 percent this year, down from 3.5 percent in 2005. (Reuters)