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Monthly Bulletin, November/December 2011 - Summary

The annual rate of inflation in the euro area, as measured by the Harmonised Index of Consumer Prices, remained at 3.0% in November. The euro area’s gross domestic product for the third quarter of 2011 grew by 1.4% in year-on-year terms and by 0.2% when measured against the previous quarter, according to Eurostat data (by comparison, GDP for the second quarter rose by 1.7% year-on-year and by 0.2% quarter-on-quarter). The exchange rate of the euro against the US dollar depreciated during November in comparison with the previous month. On 8 December 2011, the ECB’s Governing Council decided to cut each of the ECB’s key interest rates by 25 basis points with effect from 14 December 2011. Thus, the main refinancing rate was reduced to 1.00%, the marginal lending rate to 1.75%, and the deposit rate to 0.25%.

In the Czech Republic, Poland and Hungary, the annual rate of change in the HICP inflation rate increased in November in comparison with the previous month, to 2.9%, 4.4% and 4.3%, respectively. According to Eurostat data, annual GDP growth in each of these countries was lower in the third quarter than in the second quarter. In the Czech Republic, it fell from 2.0% to 1.2%; in Poland, from 4.6% to 4.2%, and in Hungary, from 1.7% to 1.5%. Exchange rate movements in the central European region continued to be affected by the adverse situation in financial markets; the Czech koruna, Polish zloty and Hungarian forint all depreciated against the euro in November, compared with their levels in the previous month. Among the central banks of the three countries, only Hungary’s Magyar Nemzeti Bank changed its monetary-policy settings in November, raising the base rate by 50 basis points, to 6.50%, with effect from 30 November. Both Česká národní banka and Narodowy Bank Polski kept their key rates unchanged in November, at 0.75% and 4.50%, respectively.

In Slovakia, GDP in the third quarter (not seasonally adjusted) grew by 3.0% year-on-year, according to SO SR data (down from 3.5% in the second quarter). The quarter-on-quarter increase in seasonally adjusted GDP stood at 0.8%, the same as in the second quarter. Overall employment increased, year-on-year, by 1.7% in the third quarter of 2011 (after climbing by 2.3% in the second quarter), and in comparison with the previous three months it went up by 0.3% (after rising by 0.4% in the second quarter). GDP growth in the third quarter exceeded NBS expectations, and the labour market situation was also better than projected.

Annual GDP growth was slower in the third quarter than in the second quarter. In terms of output performance, GDP was boosted by higher value added, mainly in the industry and construction sectors. However, the downward trend in value added in agriculture continued. On the expenditure side, the main driver of economic growth was still external demand, although its rate of growth is gradually declining. The negative contribution from domestic consumption stemmed from the trend decline in both general government and private consumption. The annual growth in gross fixed capital formation in the third quarter was therefore dampened by domestic demand; however, investment increased moderately. Net exports continued to make the largest positive contribution to GDP growth. The current account deficit of the balance of payments for the period January-September 2011 declined year-on-year. This improvement was supported by all balances except the income balance. Growth in external demand put upward pressure on exports, and since they increased more sharply than imports, the trade surplus grew. The continuing economic growth, more moderate in year-on-year terms, was positively affected by the labour market situation. Employment again increased in year-on-year terms in the third quarter, in line with the economic trend, but its growth was lower than in the second quarter. Amid the slowdown in employment growth, labour productivity growth increased moderately quarter-on-quarter. Unit labour costs climbed in the third quarter, since the annual growth in compensation per employee exceeded the growth in labour productivity. The unemployment rate remained unchanged from the previous quarter. The upward trend in the financial results of economic agents changed quite abruptly in the third quarter, as both the non-financial corporations sector and financial sector reported a slowdown in profit growth. In the case of non-financial corporations, the slowdown was largely attributable to results in industry.

In Slovakia, annual HICP inflation in November was higher than in the previous month, at 4.8%. This reflected a substantially increased annual rate of change in prices of services and transport. Looking at industrial producer price inflation, its annual rate of change rose in comparison with October, mainly due to a rise in energy price inflation. The annual rate of change in construction work prices increased moderately. The annual increase in prices of agricultural products was again markedly slower than in the month before.

The current account surplus in October further improved against its September figure, owing to the positive effects of a rising trade surplus and a lower deficit in the income balance. The services balance and current transfers balance deteriorated slightly in comparison with the previous month. Turning to the industrial production index (IPI), its annual rate of change maintained a relatively strong rising trend in October, driven mainly by year-on-year growth in the electricity, gas, steam and air-conditioning supply sector. In the manufacturing component, the transport equipment sector made the largest contribution to production growth, but this was offset by negative results in the electronics sector and machinery and equipment sector. In the construction component, the annual rate of change returned to a downward trajectory after rising quite sharply in September. As for sales in selected sectors, their annual rate of change again slowed moderately in October, mainly due to results in the sectors of industry, construction, and transport. The overall economic sentiment indicator in November increased month-on-month and declined year-on-year. While confidence rose in the services and construction sectors, it fell in the retail trade and industry sectors, and consumer confidence also declined.

The annual increase in nominal wages was higher in October than in September, while the annual decline in real wages remained unchanged. The largest increases in nominal wage growth were recorded in the information and communications sector and the selected market services sector, while the most pronounced slowdowns were in the construction and industry sectors. Annual employment growth in October was again moderately lower than in the previous month, due to lower year-on-year job growth in selected market services, industry, and retail trade. The rate of registered unemployment fell slightly in October in comparison with the previous month, to 13.3%.

In October, the stock of private sector deposits was affected mainly by a further substantial month-on-month decline in deposits of non-financial corporations, with the amount of household deposits remaining practically unchanged year-on-year. As in the previous month, the drop in deposits of non-financial corporations was largely attributable to a decline in deposits with up to two years’ agreed maturity. The annual rate of growth in corporate deposits fell substantially as a result of the decrease in their amount. As for household deposits, the increase recorded by those with an agreed maturity was offset by a decline in demand deposits. Overall, the annual rate of change in household deposits remained largely unchanged. In lending to the private sector, loans to households continued to increase in all categories (particularly housing loans and consumer credit), while loans to non-financial corporations maintained a downward trend, owing mainly to a decline in loans with a maturity of up to one year. The annual rate of change was positive in both sectors: for loans to households, it was unchanged from the previous month, while for loans to non-financial corporations, it was lower. Retail interest rates did not move significantly in October. Interest rates on loans to households rose moderately, while lending rates for non-financial corporations increased on investment loans but decreased on real estate loans. Deposit rates for non-financial corporations in October remained largely unchanged from the previous month. For households, interest rates on time deposits increased.

Note: As of January 2012, the stated month of the Monthly Bulletin of Národná banka Slovenska will correspond to the month of its publication, whereas up to now it has corresponded to the preceding month (to which most of the key data apply). For the purpose of this change, the last issue of 2011 will be published as the Monthly Bulletin for November/December. NBS Monthly Bulletins will continue to be published in the last third of each month.

Petra Pauerová
NBS Spokesperson

National Bank of Slovakia
Press and Editorial Section
Imricha Karvasa 1, 813 25 Bratislava, Slovak Republic
Tel.: +421-2-5787 2142, +421-2-5865 2142, +421-2-5787 2169, +421-2-5865 2169

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