Inflation stays put in July

Inflation remained unchanged in Greece last month at the level of 4.9 percent, for the third month in succession, as the National Statistics Service (NSS) is expected to confirm on Thursday. Given international conditions, this development can actually be seen as a positive one, since there had been fears it would exceed 5 percent for the first time after a decade. However, the drop in the price of fuel toward the end of July and the high production of fruit and vegetables have averted price rises. The gentlemen’s agreements between the Development Ministry and supermarkets have offset the rises from electricity rates last month. The government considers the first two months of the coming fall to be particularly decisive for the final level of inflation in 2008. September will see the completion of the first 12 months since the start of the oil and food price hikes, so it will be possible to compare this year’s prices with last year’s, which should point to a reduction in the rate of increase of inflation. This is provided, of course, that oil prices do not again start soaring and profiteering is curbed in the local fuel market as winter approaches. The gentlemen’s agreements with the supermarkets cover the period up to end-September, after which it would not be a great surprise if companies introduced significant price hikes. This is in fact the biggest fear of Economy Minister Giorgos Alogoskoufis, who recently made a fresh appeal to entrepreneurs to contribute to efforts to contain prices. Given July’s 4.9 percent rate, average inflation for the first seven months of the year comes to 4.5 percent, which makes it quite difficult for the government to achieve the budget target of 3.5 percent. Most economists and international analysts believe that it is now more realistic to expect average inflation to stay at around 4.5 percent for the year as a whole. Sources also point to a drop in growth from 3.6 percent in the first quarter to 3.3-3.4 percent in the second. The NSS will release the official figures next Monday.