SK: Inflation close to 3%

Price growth in Slovakia reached 2.7 % year-on-year in August with the m/m inflation rate landing at 0.2%. On a monthly basis, more than a half of the inflation rate was driven by food prices again, with categories such as fruit, milk, cheese, and eggs rising by 1-5% m/m. Another important factor were higher prices in the categories of transport, especially air and road passenger transport.

The year-on-year inflation figure landed slightly below our expectations (2.8% vs. 2.9%). The most prominent contributors were food prices, contributing 0.8pp to the inflation rate, accompanied by prices in restaurants and hotels (0.4pp), alcoholic beverages and tobacco (0.3pp) and miscellaneous goods and services (0.3pp). Core inflation reached 2.3% y/y with a 0.2% increase compared to July.

The inflation rate in Slovakia had been oscillating around the 2% mark since March. However, with the base effect fading out, the inflation rate has been rising closer to 3%. On average, price growth could reach 2.8% y/y in 2024. Core inflationary pressures persist in the economy, driven by factors such as low unemployment rates and robust nominal wage growth. On the other hand, households will use higher wages to replenish their savings, somewhat limiting spending. Thus, the increase in savings will have an anti-inflationary effect. We expect monthly inflation to grow in the range of 0.1% to 0.3% in the coming months.