Serbian inflation slows down further in August

BELGRADE - Serbian y-o-y inflation has slowed down further, amounting to 11.5 pct in August, in line with National Bank of Serbia (NBS) expectations, though the August reading is somewhat lower than the projection from the Inflation Report, the central bank said on Wednesday.

"Inflation slowdown is largely attributable to the softer growth in food prices and, to a lesser extent, prices within core inflation (CPI excluding food, energy, alcohol and cigarettes).

As regards the monthly outcome, inflation measured 0.4 pct in August, which is much lower than the average monthly inflation in the first half of the year (1.0 pct). The monthly inflation profile reflects the higher prices of petroleum products and, to a lesser degree, the rise in prices within core inflation.

The prices of food and non-alcoholic beverages decreased for the second month in a row and were by 0.5 pct lower on average than in July. Unprocessed food prices declined by 1.9 pct in August, led primarily by the lower prices of fresh vegetables. Processed food prices exhibited the same dynamics as in July, edging up by 0.2 pct, with a decline recorded in the prices of milk and dairy products, as well as oils and fats. The slowdown in the growth of processed food prices in the last two months indicates that cost-push pressures in the market of basic foodstuffs have abated. This is also suggested by the movement in food producer prices, which receded by 1.4 pct in the eight months of the year," the NBS said in a statement.

"Under the impact of the increase in petroleum product prices, energy prices went up by 2.3 pct on average. Y-o-y, energy price growth amounted to 9.0 pct in August. It should be noted that petroleum product prices continued to exert a dampening effect on y-o-y headline inflation, though less so than in the previous months.

Consistent with expectations, the prices of products and services within core inflation went up by 0.4 pct in August, driven mainly by the rise in the prices of utility services and the seasonal increase in the prices of textbooks and stationery. Y-o-y, core inflation moderated further, to 9.1 pct," the central bank said.

"Under the current projection, y-o-y inflation will continue on a downward path, receding on average by around 1 pp a month, and settling at around 8 pct by year end. The described inflation trajectory will be also supported by the weakening of global cost-push pressures and the drop-out of food and energy price hikes in H2 2022 from the y-o-y inflation rate. The inflation’s downward trajectory and its return within the target band in Q2 2024 will be also aided by the effects of monetary tightening, the slowing of imported inflation and the expected further fall in inflation expectations," it also said.