Inflation jump surprises
Soaring fuel and fruit prices jacked up headline inflation in March to 4 percent year-on-year, figures released by the National Statistics Service (EYSE) yesterday showed, with the size of the jump taking economists by surprise and forcing them to raise their inflation predictions for the overall year. The March figure was 2.5 percent up on February, when inflation dipped to 3.4 percent from a lofty 4.4 percent in the first month of the year. With international oil prices spiking as a result of the adverse developments in the Middle East and unfavorable inflation trends in the eurozone, economists had predicted March inflation as coming in at 3.7 to 3.8 percent. «Our estimate was 3.8 percent,» said Alpha Bank economist Dimitris Maroulis, who had expected a sharper decline in fruit prices. An inflationary upsurge had been expected to weigh on the eurozone, following a flash estimate from European Union statistical office Eurostat early this month which put March inflation for the region at 2.5 percent, up from 2.4 percent the previous month. EYSE’s figures showed an 8.9-percent month-on-month price hike in the fruit component, the largest spike in the consumer price index, underlining the damage caused to crops as a result of the winter blitz at the beginning of the year. On an annual basis, fruit and vegetables posted the biggest increase, up by 28.3 percent and 36.7 percent respectively, and weighing down the index by 0.93 percent. Heating oil and gasoline were both up by 4.2 percent month-on-month, adding 0.21 percentage points to the general index while, year-on-year, the two components declined by 6.2 percent and 5.4 percent. The strong price upsurge sent March annual harmonized inflation up to 4.4 percent from 3.8 percent in the previous month, while average harmonized inflation edged up slightly to 3.9 percent from 3.8 percent. More ominous for the economy, core inflation which excludes fruit, vegetables and oil, is estimated to have shot up to 3.6 percent from 3.1 percent in February, Maroulis said. «Core inflation continues to remain at a high level due to price increases in healthcare, meat and dairy products,» he said. The unfavorable price developments mean inflation will take longer to come down and will probably linger above 3 percent until August, Maroulis said. He also revised his average inflation forecast for 2001 to 3.4 percent from 3.2 percent. The Bank of Greece in its semi-annual policy report gave a 3-percent estimate, while the official projection is 2.7 percent. EYSE also released figures on private construction activity for the January-December 2001 period, which underscored the sector as one of the strongest engines of growth for the Greek economy. With construction activity, as measured by the total volume of construction permits, up by a healthy 12 percent, the sector could be called one of the pillars propping up the economy, said Alpha Bank’s Maroulis. The construction boom which took off on the back of declining interest rates and competitive mortgage loans last year is expected to keep up a strong pace of growth this year. «The prolonged stock market downturn is helping the sector with Greeks viewing property as better investments now,» Maroulis said.
