September inflation stays unmoved at 3.5 percent

Headline inflation remained flat at 3.5 percent in September, according to data released yesterday by the National Statistics Service (NSS), confounding general expectations of an uptick last month. Christos Avramidis of Proton Investment Bank, said forecasts of higher inflation had been primarily based on recent press reports of massive price increases in fresh produce triggered by profiteers. «Obviously, this has not affected inflation. Fresh produce is just one of many components making up the inflation basket,» he said. He pointed to the greater impact high government spending has on inflation. Consumers staged two nationwide boycotts last month, one against retailers in general and another against fresh produce retailers, in protest against excessive price increases. Merchants, however, said government spending and increases in public utility rates played a bigger role in the inflationary spiral. NSS figures showed a 22.5-percent jump in potato prices in September from the previous month and a 4.4-percent rise in vegetable prices. Offsetting this, however, was a 3.7-percent fall in fruit prices. On a yearly basis, vegetables were more expensive by 10.6 percent and fruits by 8.8 percent. Potato prices were down by 16.2 percent. Alpha Bank economist Dimitrios Maroulis said the fallout from this year’s unseasonable bad weather is still lingering on, evident in high fresh produce prices. On Monday, Prime Minister Costas Simitis identified above-average inflation as one of three factors that could jeopardize economic growth. Inflation might have remained flat in September but, in terms of absolute numbers, it still constitutes a cause for concern, said Avramidis. «The fact that headline inflation continues to exceed the 3-percentage-point mark and that EU-harmonized inflation is 150 basis points above the region’s average is worrying,» he said. Greek annual harmonized inflation in August was the third highest in the EU after Ireland and Portugal. At 3.8 percent, it was also significantly above the eurozone’s average of 2.1 percent and the European Central Bank’s 2-percent threshold. September prices were also affected by a 4.2-percent rise in tuition costs and a 4.3-percent jump in canteen product prices, the NSS said. Maroulis said inflationary pressures could build up again in the next two months due to unfavorable base effects, the result of a sharp fall in oil prices last year after the attacks on the USA. «I estimate inflation to rise to 3.7-3.8 percent this month and next. Favorable base effects in December could see prices falling back again to 3.3 percent,» he said. Proton Investment Bank’s Avramidis said prices could stay flat for a third consecutive month. «Barring a massive hike in oil prices, inflation could come in at 3.5-3.6 percent this month,» he said. Retail growth still going strong Economic indicators do not give the picture of an economy in difficulty. With the exception of the inflation figure, that is, which seems to be high compared to that in the entire eurozone. Still, a 3.5-percent (or 3.8-percent, if you adopt the European Central Bank’s Harmonized Index of Consumer Prices) inflation level does not indicate an explosive problem, especially if we remember that Greece went through a 22-year period (1973-95) of double-digit inflation. A figure which one could be excused to interpret as indicating a sort of consumer euphoria concerning retail sales. The National Statistics Service yesterday released the index of retail sales value. It lags somewhat behind the inflation figures (they depicted price growth rate at end-September, whereas retail sales concern July), but it shows that the value of retail sales rose 7.1 percent year-on-year in July. As for the average rise of retail sales, that figure stands at 8.7 percent for the seven-month period ending in July. Sales in big supermarkets increased even faster (10.9 percent), and even more so for Athens supermarkets (13.5 percent), indicating a continuing trend of trade concentration at a few supermarket chains. The higher Athens number also reflects a better distribution of supermarkets. This trend in favor of the biggest food stores may become even more pronounced in the coming months due to the strikes by street market vendors and the sudden increases in prices there. On the other hand, sales in multistores only increased 6.4 percent, reflecting a slower growth in sales of durable consumer goods. Also in July, there was a considerable increase in book sales, coinciding with the start of summer holidays. Among the statistics to watch for in the coming days are those on business confidence which will be released in Greece and Japan today, as well as Germany’s industrial production figures. Tomorrow, Eurostat will release figures on the eurozone’s annual growth rate, expected to average 0.6 percent at the end of the third quarter, from 0.3 percent at end-June.