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NBS Monthly Bulletin, June 2012 - Summary

The annual rate of euro area inflation as measured by the Harmonised Index of Consumer Prices was 2.4 % in May, slightly lower than in the previous month. According to Eurostat data, euro area GDP in the first quarter of 2012 declined year-on-year by 0.1% and stagnated in quarter-on-quarter terms (by comparison, in the fourth quarter of 2011 it grew by 0.7% year-on-year and contracted by 0.3% quarter-on-quarter). The exchange rate of the euro against the US dollar depreciated markedly during May in comparison with April, owing to the situation in financial markets. At its meeting on 6 June 2012, the ECB’s Governing Council decided to leave the key ECB interest rates unchanged, with the main refinancing rate standing at 1.00%, the marginal lending rate at 1.75% and the deposit rate at 0.25%.

Annual HICP inflation in May declined in the Czech Republic (to 3.5%), Hungary (to 5.4%) and Poland (to 3.6%). According to Eurostat data, the Czech Republic’s GDP for the first quarter of 2012 decreased year-on-year by 0.7% (after growing by 0.6% in the fourth quarter of 2011) and Hungary’s GDP fell by 1.4% (after rising by 1.2%), while Poland’s GDP recorded annual growth of 3.8% in the first quarter (compared to 4.2% in the previous quarter. As for the currencies of these central European countries, the Czech koruna, Polish zloty and Hungarian forint all depreciated significantly against the euro in May, in comparison with the previous month, as financial market tensions escalated. Among the countries’ central banks, only Narodowy Bank Polski changed its monetary-policy settings in May, increasing its base rate by 0.25 percentage point, to 4.75%, with effect from 10 May 2012. Česká národní banka and the Magyar Nemzeti Bank left their key rates unchanged at 0.75% and 7.00% respectively.

Slovakia’s seasonally unadjusted GDP for the first quarter of 2011, measured at constant prices, increased by 3.0% year-on-year, according to SO SR data (after rising by 3.4% in the fourth quarter of 2011). Seasonally adjusted GDP recorded quarter-on-quarter growth of 0.7% (compared to 0.8% in the fourth quarter). Total employment grew year-on-year by 0.6% in the first quarter of 2012 (0.9% in the fourth quarter of 2011), while compared to the fourth quarter it rose by 0.2% (after remaining unchanged in that quarter). Both GDP growth and the labour market situation in the first quarter of 2012 exceeded NBS expectations.

Annual GDP growth in the first quarter was positive, but moderately lower, than in the previous quarter. According to the output measure, GDP growth was boosted in particular by an increase in value added in industry, real estate business, and public administration. Looking at economic growth by expenditure, it was supported by external demand, although its annual rate fell at the beginning of the year. The year-on-year decrease in domestic demand moderated, mainly thanks to a slight rise in consumption demand. The largest contribution to this growth came from general government consumption, which offset the easing, but still negative, annual rate of change in household consumption. Domestic demand growth was dampened by negative developments in fixed investment, which declined in the first quarter and therefore counterbalanced moderately rising consumption. Net exports continued in the first quarter to make the largest positive contribution to GDP growth. The slowdown in economic activity at the beginning of the year was related to firms’ lower investment activity, which reflected inter alia a modest decline in their first-quarter profitability. The balance of payments current account surplus for the period January-March 2012 increased in comparison with the same period of the previous year. The trade balance was the main factor in this growth, and there were also positive contributions from all other component balances except for the current transfers balance. Economic growth, though lower, remained strong and was accompanied by an upturn in the labour market situation including higher job creation and income growth. Annual labour productivity growth continued to exceed wage growth, which declined in real terms due to inflation. Unit labour costs fell year-on-year in the first quarter – as a result of real labour productivity growth exceeding the rise in fourth quarter – and therefore helped to boost competitiveness. Employment in terms of the number of hours worked per person also showed a positive trend. But despite rising employment, the unemployment rate increased in the first quarter owing to demographic changes in the labour market, and it therefore remains at quite a high level.

In Slovakia, annual HICP inflation in May declined month-on-month, to 3.4%. This reflected lower annual rates of change in prices of food, energy and services. Annual inflation in prices of non-energy industrial goods remained unchanged in May. The annual rate of industrial producer price inflation was lower in April than in the previous month, due mainly to a lower annual rate of change in the energy component, especially in electricity wholesale prices and to a lesser extent gas production prices. As for prices of construction work and building materials their annual increase was moderately higher, while the decline in agricultural prices decelerated.

The balance of payments current account surplus rose slightly in April in comparison with the previous month. Set against a rise in the trade surplus were deficits in the services balance and current transfers balance. The annual growth rate of the industrial production index rose again in April, albeit more moderately than in March. This largely reflected continuing annual growth in the manufacturing component, which was, however, somewhat dampened by adverse developments in manufacture of coke and refined petroleum products and in manufacture of chemicals and chemical products. A high growth rate was again recorded by manufacture of transport equipment. The annual rate of decline in construction production increased further in April. Annual sales growth in the economy slowed in April largely due to lower growth in the industry and wholesale trade sectors, as well as in the sale and maintenance of motor vehicles. The annual rate of decline in construction sector sales moderated. The economic sentiment indicator declined in May, with decreases in the retail trade, services and consumer confidence indicators. The confidence indicators in industry and construction maintained their rising trend.

Annual growth in the average nominal wage was lower in April than in March, owing to slower wage growth in the sectors of wholesale trade, information and communication, and industry. Annual employment growth in April was only marginally lower than in the previous month, as rising employment in the information and communication sector and in the selected market services sector offset adverse employment trends in other sectors, including a decline in industry. The rate of registered unemployment decreased month-on-month in April, to stand at 13.4%.

Looking at private sector deposits in April there was an increase in the stock of deposits from non-financial corporations as well as in deposits from households. The month-on-month growth in deposits from non-financial corporations reflected a rise in the stock of deposits with up to two years’ agreed maturity, which made up for a decline in demand deposits. The annual rate of change in corporate deposits returned to growth in April after several months in negative territory. As for household deposits, all maturity categories contributed to the overall increase, which in year-on-year terms maintained a relatively high pace. The stocks of loans to non-financial corporations and to households increased in April. In the case of corporate loans, those with a maturity of up to one year recorded the largest growth, while the outstanding amount of loans in other maturities declined slightly. The annual rate of change in the stock of corporate loans was lower than in the previous month. As for borrowing by households, the strongest demand continued to be for housing loans and consumer loans. The annual rate of growth in loans to households fell slightly in comparison with the previous month. Turning to interest rates, lending rates for non-financial corporations increased moderately and, as in March, the rises were seen mainly in rates on investment loans and real estate loans. On the other hand, lending rates for households – particularly real estate loan rates and consumer credit rates – declined moderately. Deposit rates for both sectors remained largely unchanged from the previous month.

Jana Kováčová
Head of Press and Editorial Section

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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