ECONOMY

December inflation 27-mth high

Surging energy costs kept Greek consumer inflation stuck at a 27-month high of 3.9 percent in December, which unions preparing for wage talks say is eroding workers’ purchasing power. The National Statistics Service (NSS) said yesterday both headline and European Union-harmonized inflation were unchanged at a 3.9 percent annual pace, the highest since September 2005. The government’s full-year target of 2.7 percent was missed as 2007 inflation averaged out at 2.9 percent. «With heating oil rising 26.7 percent and gasoline up 15.3 percent as well as higher grain prices, these were the main drivers affecting the consumer price index in 2007,» said National Statistics Service chief Manolis Kontopyrakis. Greek consumer prices remain stubbornly higher than the average inflation in the 15 countries sharing the euro, harming the economy’s competitiveness and possibly costing jobs in the long term. According to the statistical arm of the European Commission, Eurostat, eurozone consumer inflation accelerated to 3.1 percent in December. With eurozone consumer prices above the European Central Bank’s 2.0 percent price stability target, monetary authorities are closely watching for so-called second-round effects as they decide the level of interest rates. In Greece, labor unions claim the impact of wages on unit labor costs is negligible and fully absorbed by productivity gains, while the minimum wage in Greece is the lowest in the EU. «Workers are experiencing an unprecedented reduction in the purchasing power of their wages from inflation, the price increases in all basic consumer goods, utility rates and taxes,» the country’s largest private sector umbrella union GSEE said. «In our country, we have an inflation of profits, not of salaries and wages,» said GSEE, which is expected to launch collective wage talks next month. Economists had forecast a slight pickup to 4.0 percent in December. Standing out in costs to consumers was a 26.7 percent year-on-year rise in heating oil and a 15.3 percent increase in gasoline. Although one of Europe’s sunniest and windiest countries, Greece remains heavily dependent on oil imports. But inflationary pressure was not contained to energy. Food costs were also substantially higher, with the price of butter up 26.7 percent, eggs up 14 percent, bread 14.9 percent more expensive and flour up 21.3 percent. «Higher food and energy prices were the main drivers of the consumer price index spike in the fourth quarter of 2007. «Looking ahead, we expect year-on-year inflation to remain in the 3.8 to 4.2 percent range in the first quarter of 2008 as a result of adverse base effects,» said economist Platon Monokroussos at EFG Eurobank. The government’s baseline scenario targets an average inflation rate of 2.8 percent for 2008, with GDP growth seen as easing to 4.0 percent from 4.1 in 2007. (Reuters)