CPI inflation accelerated to 2.5% y/y in October compared to 2.1% y/y in the previous month, the stat office (NSI) reported. This was a fourth month of acceleration in a row and was supported by speeding prices of food, non-food and services. CPI increased by 0.6% m/m in October.
Food prices continued to be the main inflationary factor and their growth picked up to 3.9% y/y in October. Prices of both processed and non-processed foods strengthened, including bread, milk, eggs, fruits and vegetables. More expensive imports and EU-wide dairy product developments are likely to continue boosting these products’ consumer prices in the short run, in our view.
Non-food inflation also picked up to 1.5% y/y in October, supported mainly by lower y/y decline in clothes and shoes prices compared to the previous month, as well as by accelerating prices of solid fuels. Conversely, fuel price growth decelerated to 4.7% y/y in October. As oil prices have been on the rise in November, we expect fuel prices to return to an upward trend in the next months although it might be temporary due to fading base effects.
Utility prices picked up by 4.7% y/y in October despite the slight gas price cut and the unchanged district heating and electricity price growth from the previous few months. Their strengthening of utility prices was due to increase of water supply prices, which speeded to 4.7% y/y.
Overall, headline inflation has been on upward trend in the past four months and we expect that the trend will continue in Q4 as well.