Consumer prices increased by 2.4% y/y in March, accelerating from 2.1% y/y in February, the stats office reported on Friday. The March inflation reading was 0.1pp above the consensus. In monthly terms, the CPI rose by 0.2% in March, 0.2pps above the consensus. The CPI increased by 2.3% y/y in January-March. Core inflation was 2.7% y/y in March, up from 2.3% y/y in February, as food prices went up by 6.0% y/y after rising 4.9% y/y in February. In addition, net inflation (without changes in indirect taxes) also accelerated, to 1.9% y/y from 1.7% y/y. Regulated prices rose by 1.2% y/y in the third month of 2018, following 0.9% y/y increase in February.
Food prices had the biggest contribution of 0.2pps to the headline inflation acceleration in March as their pace of increase speeded up to 5.7% y/y in March from 4.6% y/y in February. Statisticians said that the highest monthly increases within food category were reported for vegetables (including potatoes, up by 2.3% m/m), fruit (up by 1.4% m/m), milk, cheese and eggs (up by 1% m/m), meat (up by 0.6% m/m) and fish (up by 0.3% m/m). Annual consumer price growth also accelerated in the groups clothing and footwear (to 2.5% in March from 0.5% in February), housing (to 1.6% from 1.5%), hotels, cafes and restaurants (to 3.1% from 2.7%) and miscellaneous goods and services (to 2.9% from 2.5%). Furthermore, health prices increased by 1.7% y/y in March, after edging down by 0.2% y/y the month before.
Going forward, the increasing qualified labor shortages amid narrowing labor market and growing vacancies will increase the pressures on companies to raise wages (the central bank projects 5.4% nominal wage growth this year, the finance ministry – 5.2%) in order to retain their current or attract new qualified workers, thus creating upward cost-push price pressures, but also demand-pull inflationary pressures. The NBS projects consumer prices to increase by 2.3% on average this year, speeding up from 1.3% in 2017 on the back of the regulated prices increase as of this year.