SK: Inflation Exceeded 3% in October

As expected, consumer prices grew by 3.1% year-on-year in October, with a monthly increase of 0.7%. The year-on-year price increase was the third highest this year.

The monthly growth was primarily driven by higher prices for food and non-alcoholic beverages (+2.1% m/m), as well as increased costs for water supply, sewage, maintenance, and repairs in the housing and energy sectors, which again, albeit slightly, contributed to the rise in overall prices. The most significant driver of the year-on-year inflation rate was the higher prices of food and non-alcoholic beverages, which rose by 5% year-on-year. Total year-on-year inflation was also negatively impacted by items that saw price increases in previous months, with this effect persisting throughout the following year. These items include education, alcoholic beverages, medical products and supplies, food services, personal care products and services, insurance, package holidays, furniture and furnishings, clothing and footwear, recreational and cultural services, and newspapers, books, and stationery, according to data from the Statistical Office of the Slovak Republic. On the other hand, fuel prices remained significantly lower year-on-year, down by 9.5% compared to the same period last year, which positively impacted inflation.

Since spring, Slovakias inflation rate has hovered around 2%. However, as the base effect wanes, inflation has been gradually approaching 3%. For 2024, we expect average price growth to reach around 2.8% year-on-year. Core inflationary pressures persist, driven by low unemployment and strong nominal wage growth. However, households are likely to use higher wages to replenish their savings, which could limit spending to some extent. This increase in savings should have an anti-inflationary effect.

A notable rise in the inflation rate is anticipated in 2025, driven by the expiration of energy subsidies and expected increases in VAT and other taxes in January as part of the governments consolidation measures. The average inflation rate in 2025 could settle slightly below 5%.