Inflation in the last twelve months reached 14% in mid 2003, which is actually the full-year target.
Inflation in the first summer month went up to 0.9%, from 0.5% in May. First half inflation amounts to 5.7%. The official forecasts early in the year had considered a first half inflation of 7.5%.
Foodstuffs prices usually go down at this time of year, but it was precisely the foodstuffs that became more expensive in June, i.e. by 1.2%. The average price increase for this category of goods reached 7.5% in the first half. #leadend#
The decline to 14% of the inflation calculated June 2003/June 2002 does not necessarily mean that disinflation will exceed expectations, as it happened last year. The experience of the past few years shows the lowest monthly inflationary levels are registered throughout July-September and then prices pick up speed throughout October-December. The problems the agriculture is having this year might put pressure on foodstuffs prices and keep inflation relatively high.
Fresh fruit prices have already gained 9.1% in June, while eggs saw a 7.5% rise in prices and potatoes became 6.7% more expensive.
Milling and bakery products were sold for 3% more compared with May, due to the 3.2% increase in bread price. The rise in the milling and bakery product prices can also be explained by the 1.6% increase in the flour price. Price drops were seen for cheese - 2.3%, vegetables (except potatoes whose price went up by no less than 6.7%) - 2-3% and cow milk - 0.8%.
Furthermore, July 1 brought along a price increase for diesel oil and natural gases, which might generate a chain reaction where prices and tariffs of services are concerned.
The National Bank is expecting the confirmation of the inflationary trend over the next period in order to signal a resumption of rate cuts. This might be postponed, though. The inflationary trend in May-June was not significantly influenced by the serious depreciation of the ROL against the euro, given that many goods in the basket used to calculate the consumer price index are not tied to the European currency. At the same time, the connection between the inflationary expectations and the ROL exchange rate trend is less and less relevant.
The average inflationary rate throughout January-June is 0.9%, compared with 1.5% in the corresponding period of last year.
The authorities set a full-year inflation target of 13-14% compared with the 17.8% in 2002. Inflation should go below 10% for the first time next year, as Romania is the only EU accession applicant that has not managed to curb inflation to a single digit yet.
The 2004 budget draft now in the making by the Finance Ministry considers a 9% inflationary rate December to December.
Non-foodstuffs prices in June went up only 0.6% on the average, with car and car parts, refrigerators and household items registering higher price increases (1.8%, 1.2% and 1.1% respectively).
Former Development and Prognosis minister Leonard Cazan said the next ten days would be decisive for estimating the inflationary trend for the entire summer.
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