CPI inflation eased down from 4.0% y/y in June to 3.5% y/y in July, according to figures of the statistical office, published on Tuesday. The two most notable contributions for the deceleration were made by food and non-alcoholic beverages and alcohol and tobacco products, where price growth slowed down to 1.7% y/y and 8.5% y/y, respectively. The deceleration of alcohol and tobacco products’ price growth was attributed to a base effect, as in Jul 2017 higher excise duties were introduced. Furthermore, some downward pressure on consumer price growth was exerted by clothing and footwear, where prices dropped by 1.4% y/y, affected by mid-season summer sales. On the other hand, transport price growth picked up tangibly to 5.7% y/y, while housing price growth accelerated to 7.8% y/y, mostly due to higher electricity prices, the stat office explained.
Looking forward, we might expect some further deceleration of CPI inflation in the upcoming months considering the base effect of last year regarding prices of alcohol and tobacco products. On the other hand, however, we should note that PPI inflation picked up notably to 2.9% y/y in June, which is likely to translate in somewhat higher consumer prices. To note, the government expects average CPI inflation for the year at 3.0%.