Such a rise in costs cannot be fully passed on to the prices of final products and services, so a considerable number of companies, according to a survey by HUP, have already announced that they will abandon planned investments this year, and some go so far as to fear layoffs or even shutting down production as they are already operating with huge losses. Nevertheless, given the demonstrated resilience during the corona crisis and the rapid recovery thereafter, there are high expectations that the Croatian business sector, with adequate government response, will show its strength in this situation and remain on an upward trajectory of economic growth – emphasized the CEO of HUP, Irena Weber on the occasion of the data on inflation published today.
HUP: Due to rising input costs, most companies will achieve significantly worse results
It is important to once again emphasize the need for joint action between the Government and the business community in order to mitigate price pressure on the economy and the possible negative consequences on economic growth and the standard of living for all citizens. Namely, due to the rise in input costs, primarily the enormous increase in energy prices, most companies will achieve significantly worse results than expected at the beginning of the year.
Namely, the prices of goods and services for personal consumption, measured by the consumer price index, after 10.8 percent in May, 12.1 percent in June, and 12.3 percent in July, recorded a double-digit growth rate of 12.3 percent year-on-year in August. Compared to the previous month, a slowdown was recorded, with prices rising by 0.1 percent compared to July, while inflation in the first eight months was 9.5 percent year-on-year.
The producer prices of industrial products, on the other hand, increased by over 20 percent year-on-year on average in the first eight months, primarily influenced by the rise in energy prices. For consumers, in August, food and non-alcoholic beverage prices took the lead in price increases, both on a monthly and annual basis, which is not surprising given their high share (25.9 percent) in the consumer basket.
The rise in consumer prices in August was partially mitigated by capping fuel prices for personal transportation, while the new so-called Autumn package of measures to protect households and the economy from rising prices is expected to help alleviate price increases for consumers in the coming months. However, it is still expected that the annual growth rate of consumer prices will remain double-digit, with a more pronounced slowdown expected only in the second half of next year.
This means that adjustments in business operations will be necessary across all segments of the economy in the upcoming period if a decline in economic activity and subsequent recession is to be avoided. The government’s package of measures to mitigate the effects of rising energy prices is a welcome assistance, although at this moment it is insufficient for many sectors of the economy. Namely, only a small part of that package is directed towards entrepreneurs, while we continue to carefully monitor the impact of the measure regarding the capping of prices for basic foodstuffs, which could cause disruptions in the markets, HUP officials stated.
