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NBS Monthly Bulletin, October 2012 - Summary

The annual rate of euro area inflation as measured by the Harmonised Index of Consumer Prices was 2.6 % in September, unchanged from the previous month. The exchange rate of the euro against the US dollar appreciated during September, compared to its level at the end of August. At its meeting on 4 October 2012, the ECB’s Governing Council decided to leave the key ECB interest rates unchanged, with the main refinancing rate standing at 0.75%, the marginal lending rate at 1.50% and the deposit rate at 0.00%.

In the Czech Republic and Hungary, annual HICP inflation increased in September to 3.5% and 6.4%, respectively, while in Poland it remained unchanged at 3.8%. The Czech koruna and Hungarian forint depreciated against the euro in September, trading lower at the end of the month than at the end of August, while the Polish zloty strengthened against the single currency.

Among the central banks of these central European countries, both the Hungarian and Czech central banks decided in September to adjust their monetary-policy settings; the Magyar Nemzeti Bank cut its base rate by 25 basis points, to 6.50%, with effect from 26 September, and Česká národní banka reduced its base rate by the same margin, to 0.25%, with effect from 1 October 2012. Narodowy Bank Polski left its base rate unchanged at 4.75%.

In Slovakia, annual HICP inflation in September was the same as in August, at 3.8%. As for the HICP dynamics, an increase in the annual growth rate of unprocessed food prices was offset by decelerating inflation in processed food prices, energy prices and services prices. Non-energy industrial goods inflation was unchanged from the previous month. Industrial producer price inflation was, in year-on-year terms, higher in August than in the previous month, due largely to an increase in the energy component. The annual rate of change of construction work prices also increased in August, while that of building material prices declined. The annual rate of change in agricultural prices increased in August; this reflected an increase in the crop product component, which was to some extent offset by a year-on-year decline in livestock product prices.

The balance of payments current account went from a surplus in July to a deficit in August, owing mainly to a decline in the trade surplus. There was no significant change in any of the other component balances. The annual growth rate of the industrial production index remained at a high level in August, despite decelerating moderately. The main driver of the IPI’s growth continued to be the manufacturing component, in which the automotive industry has long held a dominant position. For the first time this year, the electricity, gas, steam and air conditioning supply component recorded a year-on-year increase. The annual rate of decline in construction production became more pronounced in August. Annual sales growth across the economy was lower in August than in July, the main reason being weaker sales growth in industry and in the sale and repair of motor vehicles, as well as a year-on-year decline in sales in the information and communication sector. The trend annual decline in construction sector sales continued. The Economic Sentiment Indicator increased in September on the basis of increases in the industrial and retail trade confidence indicators. Sentiment deteriorated in construction, services and among consumers.

Annual growth in the average nominal wage was lower in August than in the previous month, reflecting to a large extent low wage growth in industry and a decline in construction sector wages. The wage trends in selected market services and retail trade were positive. Annual employment growth in August was the same as in July and therefore it showed a moderate slowdown. While employment declined in most sectors, it maintained a rising trend in information and communication and in selected market services. The rate of registered unemployment in August fell slightly month-on-month, to stand at 13.2%.

Looking at private sector deposits in August there was a moderate rise in deposits from both non-financial corporations and households, while deposit holdings of other non-monetary financial institutions declined (after increasing in the previous month). The slight increase in deposits from non-financial corporations was largely attributable to growth in the most liquid corporate deposits. Despite this increase, the annual rate of change in the amount of corporate deposits was significantly more negative in August than in the previous month. As for household deposits, a month-on-month increase in sight deposits was dampened by a decline in deposits with an agreed maturity. Although the annual growth rate of household deposits was positive, it has been falling since March. Bank lending activity to the private sector contracted in August. The amount of lending to non-financial corporations has recently been somewhat volatile, recording a sharp decline in August after an increase in July. That drop was broadly-based across all maturities. In year-on-year terms, loans to non-financial corporations fell in August after almost two years of growth. Lending activity in the household sector is more stable, and outstanding amount of loans to households increased in August despite concerns about the economic situation and the adverse labour market situation. Housing loans accounted for 70% of all household loans in August. The annual growth rate of household loans was virtually unchanged from the previous month and remains at a high level. Market interest rates in August were affected by an abundance of liquidity in the interbank market, the main result of which was a decline in lending rates for non-financial corporations. In the case of lending rates for households, their movement differed according to the loan purpose category, with rates on housing loans increasing for a second successive month. Deposit rates in August remained largely unchanged for both non-financial corporations and households.

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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