Monthly Bulletin, October 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 October. The euro area’s gross domestic product for the third quarter of 201l grew by 1.4 % in year-on-year terms and by 0.2% compared with the previous quarter, according to Eurostat’s flash estimate (by comparison, GDP for the second quarter rose by 1.6% year-on-year and by 0.2% quarter-on-quarter). The exchange rate of the euro against the US dollar appreciated during October in comparison with the previous month. On 3 November 2011, the ECB’s Governing Council decided to reduce the key ECB interest rates by 25 basis points with effect from 9 November. Thus, the main refinancing rate was decreased to 1.25%, the marginal lending rate to 2.00%, and the deposit rate to 0.50%.

In the Czech Republic, Poland and Hungary, the annual rate of change in the HICP inflation rate increased in comparison with the previous month, to 2.6%, 3.8% and 3.8%, respectively. In the Czech Republic, GDP for the third quarter grew by 1.5% year-on-year (compared to a rise of 2.2% in the first quarter), and in Hungary it also rose by 1.5% (compared to 1.7%), according to Eurostat’s flash estimate. The data for Poland were unavailable. As for the currencies of these countries, their exchange rate movements in October were affected by the situation in financial markets. The Czech koruna and Hungarian forint both depreciated against the euro, in comparison with their levels of the previous month, while the Polish zloty appreciated against the single currency as a result of an intervention in the exchange market by the Polish central bank. Key interest rates in Poland, the Czech Republic and Hungary were left unchanged in October, with Narodowy Bank Polski keeping the base rate at 4.50%, Česká národní banka at 0.75%, and the Magyar Nemzeti Bank at 6.00%.

In Slovakia, annual HICP inflation in October was higher than in the previous month, at 4.6%. This reflected an increased annual rate of change in energy prices, prices of non-energy industrial goods, and services prices. Annual food price inflation remained the same. Looking at industrial producer price inflation, its annual rate of change rose moderately in comparison with September, reflecting mainly an increase in energy price inflation. Prices of construction work again recorded a slower annual rise, and so too did prices of agricultural products, with the annual rate of change in cereal prices declining substantially.

Slovakia’s seasonally unadjusted gross domestic product for the third quarter of 2011, measured at constant prices, grew by 2.9% year-on-year, according to the SO SR’s flash estimate (in the second quarter of 2011, it rose by 3.3%). The quarter-on-quarter increase in seasonally adjusted GDP declined to 0.7%, from 0.9% in the second quarter. Overall employment increased, year-on-year, by 1.7% in the third quarter of 2011 (after climbing by 2.1% 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.

The current account of the balance of payments moved into surplus in September, owing to a further increase in the trade surplus. The income balance and services balance both made positive contributions to the current account balance, as their deficits declined. Only the current transfers balance deteriorated in month-on-month terms. Turning to the industrial production index, its annual rate of growth increased in September after declining in each of the three previous months. In the manufacturing component of industrial production, production growth was driven mainly by the manufacture of machinery and equipment sector and by the manufacture of electronics sector. By contrast, production growth in the manufacture of transport equipment sector declined sharply. In September 2011, construction production increased more sharply than in any month since the end of 2008. As for sales in selected sectors, their annual rate of change declined in September. The slowdown in annual sales growth in the industry sector and information and communication sector was to some extent offset by stronger sales growth in the construction sector. The overall economic sentiment indicator for October remained unchanged from the previous month and was lower year-on-year. Whereas confidence in the industry and construction sectors increased, confidence in the retail and services sectors fell and consumer confidence also declined.

The annual increase in nominal wages was lower in September than in August, and real wages declined year-on-year. Almost all the sectors under review contributed to the easing of nominal wage growth; the slowdown was most pronounced in the information and communication sector and the industry sector. Annual employment growth in September was moderately slower than in August, with most of the sectors under review reporting a lower increase. The rate of registered unemployment rose slightly September in comparison with the previous month, to 13.4%.

The volume of private sector deposits declined in September, reflecting mainly a sharp fall in deposits of non-financial corporations. Household deposits rose moderately. Regarding corporate deposits, a significant decline in deposits with up to two years’ agreed maturity was observed, offsetting their robust rise in the previous month. The annual rate of growth in corporate deposits declined as a result of their fall in volume. As for household deposits, those with an agreed maturity (both up to two years and over two years) increased in volume, while demand deposits declined. The highest increase was recorded in the annual rate of growth in deposits with up to two years’ agreed maturity. As for changes in the stock of loans to the private sector in September, loans to households increased in all categories, with the most pronounced growth observed in housing loans and consumer loans. By contrast, loans to non-financial corporations declined, owing mainly to a decline in loans with a maturity of up to one year. In both sectors, the annual rate of growth decreased moderately in comparison with the previous month. Retail interest rates and deposit rates remained largely unchanged in September. Lending rates rose slightly for households and fell slightly for non-financial corporations, while deposit rates for both households and non-financial corporation stayed more or less at the previous month’s levels.

The full text of the NBS Monthly Bulletin for October 2011 will be published on the NBS website on 30 November at 10.00 a.m.

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
Internet: http://www.nbs.sk

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