Concern over rise in core inflation

Inflation remained at the level of 4.9 percent in July, for the third month in a row, the National Statistics Service (NSS) confirmed yesterday. Prices of some key consumer goods have actually registered double-digit growth since last year, compromising purchasing power, particularly of the financially weaker groups of society. NSS suggested yesterday that inflation would have exceeded 5 percent had it not been for the slide in oil prices in international markets or the gentlemen’s agreements between the Development Ministry and supermarket chains to contain or even cut prices. The general secretary of the NSS, Manolis Kontopyrakis estimates that inflation this month will record a slight decline if oil prices remain at present levels. However the worry is that core inflation (i.e. excluding fuel, fruit and vegetable prices) has risen to 4 percent, which indicates that the persistence of oil prices at such high levels for over a year has considerably affected consumer prices of a wide range of products and services. Given the particularities of the Greek market and the distortions of competition, these secondary price rises will be maintained even if oil and food prices decrease. Average inflation in the first seven months of the year stood at 4.5 percent, making it highly improbable that the Economy Ministry will achieve its target of 3.5 percent for the whole of 2008. Instead, a consumer price index rate of 4.5 percent now appears more likely.