ECONOMY

Experts see inflation rate rising slightly, to 3.4 percent in August

Greek inflation is expected to rise slightly to 3.4 percent year-on-year in August due to higher fuel prices and the impact of bad weather on fruit prices, economists forecast yesterday. «Greek CPI should go up by 0.2 percent month-on-month to stand at 3.4 percent year-on-year versus 3.3 percent in July,» said economist Jose Garcia-Zarate at Standard & Poor’s. «The historical pattern shows that August is a month with hardly any seasonal price variations. However, I anticipate higher fuel prices during the month.» Other economists contacted by Reuters ahead of the announcement of the inflation figure next Monday said they expect August inflation to come in at 3.3-3.4 percent, adding that the impact of recent bad weather on fruit prices will be more visible next month. «We expect inflation to remain steady at 3.3 percent or probably rise to 3.4 percent in August on a yearly basis, as there is a rising trend in fuel prices that won’t be offset by fruit prices,» said economist Dimitris Maroulis at Alpha Bank. He said bad weather in August probably will not allow a slowdown in the price of fresh fruit after they rose about 15 percent in the 12 months to July. Economists said price increases in services that appeared after the introduction of the euro at the start of the year would continue to have an impact on headline inflation. They cited as an example hotel prices, which are up nearly 9 percent in the 12 months to July. Greece’s main consumer group INKA led a shopping boycott on Tuesday against rising food and other prices from the introduction of euro cash. Economists agreed with recent comments by Greece’s central bank governor, Nicholas Garganas, that inflation is expected to remain at current levels for the next few months and then drop to 3 percent at the end of the year. «We consider the level of 2.9-3.0 percent to be attainable in December due to positive base effects,» said economist Miranda Xafa at Schroder Salomon Smith Barney. The Greek government recently raised its inflation target for 2002 to 3 percent, while the Bank of Greece sees inflation this year averaging at 3.5 percent, a view shared by most economists. In a recent interview, Garganas, an ECB council member, said rising labor costs were the main factor for the difference between inflation in Greece and elsewhere in the eurozone. Greece’s EU-harmonized inflation was unchanged in July at 3.6 percent, the third highest in the eurozone after Ireland and the Netherlands. In the same month, inflation in the eurozone rose to 1.9 percent year-on-year. It is forecast to jump back above the ECB’s self-set 2-percent ceiling in August to 2.1 percent. Greece’s wholesale inflation – considered by economists as an indicator of upcoming inflation trends – was 0.7 percent in July year-on-year after minus 0.1 percent in June.