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NBS Monthly Bulletin, June 2011 - Summary

The year-on-year rate of euro area inflation, as measured by the Harmonised Index of Consumer Prices, remained at 2.7% in June. The exchange rate of the euro against the US dollar appreciated during the same month. The ECB’s Governing Council decided at its meeting on 7 July 2011 to raise the key ECB interest rates by 25 basis points with effect from 13 July 2011. Thus, the main refinancing rate was set at 1.50 %, the marginal lending rate at 2.25 %, and the marginal deposit rate at 0.75 %.

The annual rate of HICP inflation in June slowed in the Czech Republic, Poland and Hungary to, respectively, 1.9%, 3.7%, and 3.5%. The exchange rate of the Czech koruna and Hungarian forint strengthened against the euro over the course of June, while the Polish zloty depreciated. In the same month, interest rates in the Czech Republic and Hungary remained unchanged. As for monetary-policy settings in the countries under review, the only modification in June took place in Poland: on 9 June 2011, Narodowy Bank Polski raised the base rate by 0.25 percentage point, to 4.50%.

In Slovakia, the annual rate of HICP inflation in June decelerated from the previous month, to 4.1%. The lower rate reflected the slower annual rise in prices of unprocessed food and services. As regards industrial producer prices, their annual rate of change remained steady, as a sharper rise in producer prices of manufacturing goods was offset by a slower increase in energy prices. The annual rate of increase in agricultural product prices was lower in May than in April, largely due to a slower rise in prices of plant products. On the other hand, animal product prices in May recorded a higher annual rise.

The month-on-month improvement in May’s current account deficit stemmed mainly from a higher trade surplus and to a lesser extent from a decline in the current transfers deficit. Negative contributions to the current account balance came from rising deficits in the income balance and services balance. As for the industrial production index, its annual rate of growth increased in May as a result of increased production in manufacturing industry, driven up mainly by higher output in the manufacture of transport equipment. The mining and quarrying sector also made a positive contribution. In the construction sector, the annual rate of decline in production eased in May. The aggregate sales for the selected sectors accelerated in May in comparison with the previous month. While sales in the industry and construction sectors picked up, their positive effect was dampened by a slower rise in retail sales. The overall economic sentiment indicator recorded a month-on-month increase in May, as each of its component confidence indicators declined. Confidence in industry fell by the largest margin, reaching its lowest level since September 2009, largely as a result of negative expectations for industrial production.

The average nominal wage recorded a higher year-on-year increase in May than in the previous month, while the average real wage declined at the same rate as in April. Contributions to the rise in nominal wage growth came from all the sectors under review, apart from the information and communication sector. The industry sector recorded the sharpest annual rise, almost 5 percentage points higher than in the previous month. Employment growth in May was moderately slower in year-on-year terms than it had been in April. The rate of registered unemployment fell slightly in May in comparison with the previous months, to stand at 12.8%.

Deposits of both non-financial corporations and households stood higher in May than in the previous month. As regards the deposits of non-financial corporations, a rise in the most liquid deposits was dampened 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 more than 2 years. In May, the deposits of each sector continued to rise in year-on-year terms; however, deposits of non-financial corporations increased more slowly than in the previous month and demand deposits recorded a further year-on-year decline. The volume of lending to both sectors increased in May. In the case of loans to non-financial corporations, the stock of loans of all maturities increased; this was especially the case with longer-term loans with a maturity of more than five years. Lending growth to households maintained its sharp rise in May, as house purchase loans recorded the largest increase and consumer loans a slight rise. In both sectors, the annual rate of change in lending was positive and largely unchanged in comparison with the previous month. The cost of borrowing for non-financial corporations increased in line with market interest rate movements; borrowing in the form of investment loans and real estate loans was adversely affected by rises in the interest rates on these loans. Lending rates to households remained largely unchanged. Interests rates on deposits of non-financial corporations and households behaved similarly, with the remuneration of longer-term deposits rising by the largest margin.

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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