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Report on Economic Development in June 2010 - Summary

The year-on-year inflation rate in the euro area measured by the harmonised index of consumer prices reached 1.4% in June (1.6% in May). The weakening of the euro exchange rate against the American dollar ceased in June. During its July meeting, the Governing Council of the ECB decided that the interest rate for main refinancing transactions and the interest rate for overnight refinancing and overnight sterilization transactions would remain unchanged at the level of 1.00%, or 1.75% and 0.25% respectively.

In June, the year-on-year inflation measured by the harmonised index of consumer prices in Poland and Hungary slightly accelerated to 2.4% and 5.0% respectively. The growth of price level in the Czech Republic compared to the same period last year remained unchanged at the level of 1.0%. The depreciation of the Czech koruna, the Polish złoty and the Hungarian forint against the euro continued also in June. The key interest rates in the Czech Republic, Poland and Hungary remained unchanged.

The year-on-year inflation measured by the harmonised index of consumer prices (HICP) in Slovakia, when compared to the previous month, remained unchanged in June at the level of 0.7%. In June, the year-on-year decline in energy prices accelerated owing to the decrease in the year-on-year dynamics of fuel prices. Prices of industrial goods excluding energy prices and prices of foodstuffs recorded a slight acceleration of the year-on-year dynamics. An increased pace of growth in foodstuff prices was influenced by an acceleration in growth in both processed and unprocessed foodstuff prices. Prices of services on a year-on-year basis remained unchanged. Regarding prices of industrial producers, a slowdown in year-on-year decline continued in May. A slight decline in year-on-year growth was recorded in prices of construction works. The year-on-year dynamics of prices of agricultural products, when compared to the previous month, increased slightly in May.

Balance of the current account in May deteriorated when compared to the previous month. Higher current account deficit resulted mainly from the decline of the surplus in the balance of trade and partially from the increased deficit in the balance of incomes.Development in the current transfers balance and the balance of services had a positive impact on the overall balance of the current account.

The industrial production index in May again recorded a year-on-year growth influenced by increasing global demand. The year-on-year dynamics of the industrial production was again significant, as a result of the increased dynamics of industrial production, above all in these sectors: electronics, manufacturing of machines and equipment and manufacturing of transport equipment. A short-term effect of lower production in the same period last year also partially contributed to the improvement. The year-on-year decline in the level of construction production in May deepened in comparison to the previous month. The year-on-year dynamics of total revenues growth for selected sectors accelerated in May, mainly as a result of a very positive dynamics of industrial revenues. A positive influence, i.e. the acceleration of the year-on-year growth rate, or more specifically, the deceleration of the year-on-year decline of revenues was recorded in all industrial sectors except for the construction industry owing to low domestic demand. The overall indicator of the economic sentiment increased in June compared to the previous month. Positive development of the indicator was influenced by enhanced confidence in all of its components, i.e. in retail, services and consumers’ confidence as well as in industry and construction.

The year-on-year dynamics of the average nominal as well as real wages slowed down in May when compared to the previous month. The negative year-on-year dynamics of the average employment rate for selected sectors ameliorated again in May. This reduction of the decrease in comparison to the same period last year was recorded in almost every sector except for selected market services and accommodation services. The rate of registered unemployment decreased in May to 12.2 % when compared to the previous month.

The development of deposits by sectors in May was as following: the volume of deposits to both non-financial corporations and households increased with overnight deposits in both sectors growing most significantly. The year-on-year dynamics of the deposits of households reached a positive value after five months of decline. Furthermore, the year-on-year growth rate of deposits of non-financial corporations have increased within the last two months. The substantial growth of overnight deposits was a main factor influencing the development of the monetary aggregate M3 in May. The volume of loans to the private sector in May increased month-on-month mostly due to increased lending to households. Loans to non-financial corporations recorded a slight growth on a month-on-month basis. Loans to households also increased on a year-on-year basis. However, the negative dynamics of loans to non-financial corporations showed a moderate decrease. As for the development of clients’ interest rates on loans, the trend of declining interest rates on loans to households continued in May, with the interest rate on loans for real estate purchases falling most significantly. Interest rates on loans to non-financial corporations grew slightly grew again in May. Within both sectors in May, clients’ interest rates on deposits stabilised, or more specifically, slightly decreased.

Petra Pauerová
Spokesperson of th 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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