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NBS Monthly Bulletin, July 2011 - Summary

The year-on-year rate of euro area inflation, as measured by the Harmonised Index of Consumer Prices, stood at 2.5% in July. The euro area’s gross domestic product for the second quarter of 201l grew by 1.7 % in year-on-year terms and by 0.2% when measured against the previous quarter, according to Eurostat’s flash estimate (by comparison, GDP for the first quarter rose by 2.5% on a year-on-year basis and by 0.8% quarter-on-quarter). The exchange rate of the euro against the US dollar depreciated during July. At its August meeting, the ECB’s Governing Council decided to leave the key ECB interest rates unchanged, with the main refinancing rate standing at 1.50%, the marginal lending rate at 2.25% and the deposit rate at 0.75%.

In the Czech Republic, the annual rate of HICP inflation in July remained unchanged from the previous month, at 1.9%, while in Poland and Hungary it slowed, to 3.6% and 3.1%, respectively. In the Czech Republic, GDP for the second quarter grew by 2.4% year-on-year (compared to a rise of 2.8% in the first quarter), and in Hungary it rose by 1.2 % (compared to 1.6%), according to Eurostat’s flash estimate. The exchange rates of the Polish zloty and Hungarian forint depreciated against the euro over the course of July, while the Czech koruna appreciated. Key interest rates in Poland, the Czech Republic and Hungary were left unchanged in July, 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, the annual rate of HICP inflation in July decelerated from the previous month, to 3.8%. Inflation was pushed down by lower annual rises in food and fuel prices, while the annual rate of change in prices of non-energy industrial goods and prices of services accelerated slightly from the previous month. As regards industrial producer prices (IPP), their annual rate of growth in June was lower than in the previous month. Almost every IPP category recorded lower annual inflation, and energy prices even declined year-on-year, mainly due to lower prices for the manufacture of gas and distribution of gaseous fuels through mains. Only animal product prices recorded a higher annual rate of change.

Slovakia’s seasonally unadjusted GDP for the second quarter of 2011, measured at constant prices, increased by 3.3% year-on-year, according to the SO SR’s flash estimate (in the first quarter of 2011, it rose by 3.5%). The quarter-on-quarter increase in seasonally adjusted GDP was 0.9 %, the same as in the first quarter. Overall employment in the second quarter was 2.1% higher than in the same period of 2010 (in the first quarter it was 2.0% higher), and compared with the previous quarter it rose by 0.4%. GDP growth and the recovery in the labour market recorded in the second quarter of 2011 was faster than NBS had projected.

The current account balance in June showed an improvement on the previous month by recording a modest surplus. This upturn was driven mainly by an increase in the trade surplus. As for the industrial production index, its annual rate of growth eased in June in comparison with the previous month, owing to both a base effect and in particular a lower rise in manufacturing production. The slowdown in manufacturing production was attributable to a substantially lower annual rate of growth in the manufacture of machinery and equipment and to a decline in the manufacture of computers and electronics. In the construction sector, the annual rate of decline in production eased in June. Turning to aggregate sales for selected sectors, their annual rate of change was lower in June than in May. Almost all sectors recorded lower annual sales growth, and the slowdown was most pronounced in industry. A year-on-year decline in sales was seen in the sectors of wholesale trade and the sale and maintenance of motor vehicles. The overall economic sentiment indicator was lower in June than in the previous month, reflecting downturns in the component indicators of confidence in industry, construction, and services. On the other hand, the indicators of consumer confidence and confidence in retail trade showed an improvement.

As for the average nominal wage, its annual rate of change in June increased from May, while the average real wage declined. A fall in nominal wage growth was seen in all of the sectors under review, except for the construction sector and information and communication sector, and the slowdown was most marked in industry. Annual employment growth in June was moderately higher than in May, which reflected positive employment developments in the transportation and storage sector. In industry, however, the trend of falling employment growth continued. The rate of registered unemployment rose slightly in June in comparison with the previous month, to stand at 13.0%.

Deposits of both non-financial corporations and households stood higher in June than in the previous month. As regards the deposits of non-financial corporations, a rise in the most liquid deposits was almost completely offset by a decline in term deposits with an agreed maturity of up to two years. By contrast, the increase in household deposits consisted mainly of a rise in term deposits with an agreed maturity of up to 2 years. The deposits of both sectors maintained an annual rate of growth in June, although the increase in deposits of non-financial corporations again declined in comparison with the previous month. The volume of lending to both sectors continued to rise in June. In the case of loans to non-financial corporations, the largest growth was in loans with a maturity of up to 1 year, with operating loans being most in demand. Lending growth to households was driven mainly by the rise in house purchase loans and to a lesser extent by growth in consumer loans and other loans. Lending to both sectors recorded a year-on-year increase; in the case of loans to households, this growth was almost the same as in the previous month, while for loans to non-financial corporations it was higher. The upward trend in the cost of borrowing for non-financial corporations continued in June, in line with market interest rate movements. Interest rates on real estate loans recorded the largest rise. By contrast, lending rates to households declined slightly, largely due to a drop in the cost of house purchase loans and consumer loans. Interest rates on deposits of non-financial corporations and households behaved similarly, with the remuneration of term deposits of between 1 and 2 years continuing to increase.

Petra Pauerová
Spokesperson of the NBS

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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