Inflation in April falls slightly to 3.8 percent

The consumer price index in April dipped to 3.8 percent year-on-year from 4 percent the previous month, according to data released by the National Statistics Service yesterday, in the first signs that inflation could finally be heading downward after a torrid start to the year. The decline in consumer prices last month was due principally to the delayed payment of the Easter bonus and a sharp fall in fruit prices. «The deferment in the Easter bonus to May this year from April last year shaved 0.29 percentage points off the consumer price index,» said Dimitrios Maroulis of Alpha Bank. On the negative side, the continued surge in fuel and heating oil prices added 0.3 percentage points to the index. Hikes in air and sea fares and increased cigarette prices also jacked up the index last month. The inflation deceleration was also apparent in core inflation, which is estimated to have edged down to 3.4 percent in April from 3.5 percent the previous month, and in annual harmonized inflation, which fell to 4.1 percent from 4.4 percent. Despite the inflation ease-up, Greek inflation continued to be one of the highest in the eurozone. It is also significantly above the 2.2 percent estimated by Eurostat for the region in April. This divergence could mean that Greece is losing its competitive edge, Bank of Greece Governor Lucas Papademos warned in his recent annual address to shareholders. The inflation climbdown is expected to continue through the summer, said Alpha Bank’s Maroulis, with headline inflation projected to decline to 3 percent in July and then edge up to 3.5 percent in November before falling back to 3.1 percent at year-end. EFG Eurobank Ergasias economist Platon Monokroussos forecast a «more pronounced [inflation deceleration process] in the May-June 2002 period» followed by a gradual return to high levels in the second half of the year. He said headline inflation is expected to exceed EU averages throughout the year as higher labor costs and long-term rigidities in key domestic goods and service markets keep prices at stubbornly high levels. Monokroussos forecast inflation averaging out at 3.8 percent, substantially higher than the Bank of Greece’s upwardly revised figure of 3.5 percent. Maroulis said a steady oil price of $25 per barrel could keep inflation at around 3.4 percent.

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