CPI inflation slowed to 1.4% y/y in August, down from 1.5% y/y in the previous month, the statistical institute (Instat) reported. The easing was driven by decelerating food price growth, which we think was mostly related to the new appreciation of the Albanian Lek versus the EUR in the past few months, which has resulted in a downward pressure on imported foods’ prices and on their effect on the domestic consumer prices. We note that Bank of Albania (BoA) recently warned that on the domestic side inflationary pressures also remained insufficient given that utilization of production capacities continued to be subdued. Accordingly, we expect that CPI inflation will keep its current level in the next few months. BoA already projected that the CPI headline print will not reach its 3.0% target before 2021. On monthly basis, CPI inflation rose for the first time since February, by 0.3% m/m.
Food inflation decelerated to 2.4% y/y in August reflecting slowing price growth in vegetables, sugar and sweets, milk, cheese and eggs during the month. Bank of Albania (BoA) expected such slowdown considering it an effect from easing food prices in Albania’s main trading partners. On the other hand, transport prices returned to growth after three consecutive months of y/y declines and rose by 1.2% y/y in August. Nevertheless, the data breakdown showed that transport inflation was boosted by stronger prices of transport vehicles and services rather than by fuel price growth.