Summary-Report on Economic Development in March 2010
The year-on-year rate of inflation in the euro area measured by the harmonized index of consumer prices reached 1.4% in March (0.9% in February). The euro exchange rate against the American dollar depreciated in March. During its April meeting the Governing Council of the ECB decided that the interest rate for the 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.
The economy of Hungary recorded an acceleration in its year-on-year increase in price level. The year-on-year dynamics of prices mitigated in Poland and remained unchanged in the Czech Republic. The exchange rate of the Czech koruna and the Polish zloty, as well as of the Hungarian forint appreciated in March. The Magyar Nemzeti Bank decreased its basic interest rate by 0.25 of a percentage point again in March. The key interest rates in Poland and the Czech Republic remained unchanged.
The year-on-year inflation in Slovakia when compared to the previous month increased to the level of 0.3% in March. This was a result of the year-on-year acceleration in the rate of growth of foodstuff prices and deceleration of the year-on-year decline in energy prices and industrial goods excluding energy prices. Energy prices were influenced by faster dynamics of fuel prices. Prices for services stagnated on a year-on-year basis. Prices of industrial producers recorded a deepening of negative dynamics while a more significant reduction in prices for energy was partially compensated by a slowdown in the year-on-year decline in prices of manufacturing goods and raw materials. The negative dynamics of agricultural products mitigated.
The achieved current account balance when compared to the previous month improved in February. The month-on-month decrease in the current account deficit was influenced by the change from the current transfers balance deficit in January into a surplus in February. A positive impact of the change of the balance of current transfers on the current account deficit development was partially compensated by a worsened month-on-month development of other current account items. The growth of exports compared to that of imports was more significant.
The industrial production index continued to grow in February, which was influenced by a gradual recovery of the production level in the second half of 2009. This positive trend is supported by the development of the external environment which is sustained by international sentiment indicators. The March cyclical survey in industry was again optimistic with growing demand and expectations of growing production. The year-on-year decline in construction activity deepened in February and the March cyclical survey again suggested a possible stabilization of the low level of construction activity. The revenues in selected sectors jointly reached a moderate acceleration of year-on-year dynamics in February, primarily owing to the year-on-year increase in the growth rate of revenues in industry.
The overall indicator of economic sentiment increased in March in comparison to the previous month. Apart from the growing confidence in industry, the indicator´s development was also positively influenced also by a growing confidence in services, retail and consumer confidence. A positive development of the services confidence indicator, as well as that in retail were influenced primarily by a more optimistic rating of the business situation. It was foremost the worsened assessment of the current level of demand that contributed to the decline of confidence in the construction industry. In comparison to the previous month, the confidence of consumers increased when assessing the expected financial situation of households, the anticipated savings of households and the expected development of unemployment.
The dynamics of both the average nominal and real wages, increased in February in comparison to the previous month. On average, the employment in selected sectors decreased on a year-on-year basis, but compared to the previous month, the decline was more moderate. The year-on-year dynamics of employment declined most significantly in wholesale, restaurant and catering services, information and telecommunications and in industry. The rate of registered unemployment reached 13.0% in February and it increased moderately in comparison to the previous month.
The development of deposits by sectors was similar in February and deposits of non-financial corporations and households increased month-on-month despite the year-on-year dynamics being slightly negative. The trend of transferring deposits into longer-term products and share funds continued primarily in the households sector. The year-on-year dynamics of loans to the private sector decelerated in February. Loans to non-financial corporations in February slightly decreased when compared to the previous month, while the negative year-on-year dynamics deepened. Loans to households increased month-on-month and its positive year-on-year growth rate mitigated. Client interest rates on loans to non-financial corporations did not change significantly in February. A relatively low interest on loan products was accompanied by moderate growth in the volume of newly provided loans and also by growth in the volume of current account overdrafts. Interest on loans to households had a prevailingly growing trend. In February, client interest rates on deposits of non-financial corporations and households again did not change significantly.
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