In line with our forecasts, the inflation declined from 1.3% y/y in July to
1.2% y/y in August. Compared with July, consumer prices declined by 0.4%.
Just as in previous months, the decline in the prices of food and
non-alcoholic beverages had the greatest influence on the reduction in
annual inflation, with prices in August being 1.4% lower than in July,
whereas in comparison with August 2001, they were 2.2% lower. We are
continuing to experience a decline in the prices of clothing and footwear -
0.5% m/m and 1.0% y/y - and price stability compared with last month in
'Furnishings, household equipment and routine maintenance of the house' -
we experienced increase of 1.6% y/y. The effect of the growth in
electricity tariffs on inflation stopped in August - electricity prices
increased by 0.1% m/m. The influence of the weakening domestic demand on
the level of consumer prices continues to remain visible in the inflation
data.
The latest data on the money supply indicate that a turnaround in
inflation should not be expected over the coming few quarters. We believe
that in the situation where there is low demand pressure the rising oil
prices should not spill over into the prices of other goods. According to
our forecasts, the weaker demand pressure and the reduction in excise duty
on alcohol will bring the level of inflation down to 1.4 - 1.5% y/y by the
end of the year.
Jakub Dvorak, Investment Research, CSOB