Inflation Slowed to 13.1 Percent in December, but There Is No Reason for Optimism

Consumer prices in Croatia rose by 13.1 percent in December, while inflation for the entire year of 2022 was 10.8 percent, the Croatian Bureau of Statistics reported on Tuesday.

The latest statistical data shows that the growth of consumer prices has slowed on an annual basis. Namely, according to the data published to date, annual inflation rates have recorded record levels for several months in a row, with the last record being in November when inflation reached a record 13.5 percent.

Prices of goods and services for personal consumption, measured by the consumer price index, fell on a monthly basis and were on average 0.3 percent lower in December compared to November.

On an annual basis, all categories increased, with the highest average increase in consumer prices recorded in the group of food and non-alcoholic beverages, at 19 percent. Following with 17.1 percent is the category of restaurants and hotels, then household goods, household equipment, and regular household maintenance, which recorded a jump of 16.1 percent, followed by the category of housing, water, electricity, gas, and other fuels, with an increase of 16 percent.

Furthermore, prices of clothing and footwear jumped by 12.1 percent, various goods and services by 11.5 percent, in the category of recreation and culture by 9.6 percent, transportation prices by 8.4 percent, and for example, alcoholic beverages and tobacco by 5.3 percent. The mildest increase was recorded in the category of communications, at 0.9 percent.

Statisticians emphasize that the rise in annual inflation rates in December was primarily contributed by price increases in the groups of food and non-alcoholic beverages (4.93 percentage points), housing, water, electricity, gas, and other fuels (2.70 percentage points), transportation (1.24 percentage points), followed by the category of household goods, household equipment, and regular household maintenance (0.92 percentage points), restaurants and hotels (0.85 percentage points), etc.

When observed by specific groups, the highest average price increase on an annual basis was recorded in the group of processed food products, at 18 percent, contributing 4.06 percentage points to the increase, the DZS notes.

On a monthly basis, the DZS statistics showed that the prices of food and non-alcoholic beverages also rose the most on average, by 1.2 percent, the categories of alcoholic beverages and tobacco and recreation and culture rose by 0.8 percent each, and various goods and services by 0.7 percent.

On the other hand, the largest price drop was recorded in the category of transportation, by four percent, followed by clothing and footwear with a drop of 2.8 percent, and a drop of 0.6 percent was also recorded in the category of housing, water, electricity, gas, and other fuels.

The DZS in its press release on the consumer price index also presents data on inflation measured by the harmonized index of consumer prices (HICP), which is a comparable measure of inflation with European Union countries.

According to this data, the prices of goods and services for personal consumption in December compared to November fell on average by 0.1 percent.

Compared to December 2021, or on an annual basis, consumer prices, measured by the harmonized index of consumer prices, rose by 12.7 percent, while on an annual average they were higher by 10.7 percent, according to DZS data.

RBA Analysts: There Is No Reason for Optimism

The gradual slowdown in annual growth rates was expected, according to analysts at Raiffeisen Bank, which was also indicated by data on the movement of consumer prices of industrial products where a slowdown was recorded in December on an annual basis.

This is particularly important in the movement of prices of intermediate goods where the trend of accelerating prices has also been interrupted, which can be a good indicator of future movements in consumer goods prices, although this spillover occurs with a certain time lag.

However, in an environment of still high uncertainty, there is not much reason for optimism as elevated or double-digit levels of inflation will persist in the early months of 2023. However, a slight trend towards lower rates should begin.

Nevertheless, a significant portion of inflationary pressures will persist throughout 2023 when we expect an average inflation rate of over 7.5 percent.