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Summary-Report on Economic Development in September 2009

The year-on-year rate of inflation in the euro area measured by the harmonized index of consumer prices remained negative in September and reached -0.3% (in August -0.2%). The euro exchange rate against the UD dollar strengthened in September while the reports on macroeconomic development in the USA acted against the US dollar. During its meeting in October 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 sterilisation transactions would remain unchanged at the levels of 1.00%, 1.75% and 0.25%, respectively.

The economies of Poland, Hungary and the Czech Republic recorded a slowdown in the year-on-year increase in prices in September. The exchange rate development of the whole Central European region was mostly affected by the external factors and behaviour of short-term foreign investors which resulted in the fact that the Czech koruna as well as the Hungarian forint appreciated at the end of September and the Polish zloty depreciated against the euro. Interest rates changed only in Hungary when the Magyar Nemzeti Bank decreased its key interest rate. The key interest rates of Poland and the Czech Republic remained unchanged.

The year-on-year inflation rate in Slovakia slowed by 0.5 of a percentage point when compared with the previous month and thus stagnated on a year-on-year basis while it again reached the lowest level since the beginning of HICP monitoring. This development was caused above all by the significant slowdown of the year-on-year growth rate of energy prices ( a base effect in the price of heating) and the price of services. Additionally, the other basic groups of HICP inflation recorded a slowdown in the year-on-year growth rate of prices, excluding processed foodstuffs prices. With regard to foodstuffs there was only a moderate increase in the price of cigarettes as a consequence of the increase in consumer taxes which occured in February. In the area of production costs the year-on-year decline in the price of products of industrial producers persisted in August which was caused by the continued decrease in prices of energy and mineral resources. The price of water and sewage transport moderately increased. The price of agricultural products recorded a year-on-year decline which was less significant than previously.

The current August data regarding the current account deficit considerably improved when compared with the previous month. The change of the July deficit to a  moderate surplus of the current account was above all a consequence of having reached an increase in the surplus of the trading balance. The year-on-year decrease in the industrial production index considerably slowed in August which resulted above all from a more favourable external environment and a considerable base effect from August 2008. (production would have decreased by approximately by 15% without it). The year-on-year growth rate was the most favourable since October 2008 which indicates an increase in economic activity. Similarly, revenues in the selected sectors reached a slowdown in the year-on-year decrease above all as a consequence of the slowdown in the year-on-year decline in the revenues of the industry. In September business and consumer survey researching prosperity in the industry found that expectations of higher production continued to prevail although at a lower level. However, the indicator of current orders stagnated. These results do not indicate a rapid recovery of activity but rather a gradual revitalisation. The year-on-year fall in building production slowed in August. However the September survey of prosperity does not indicate any improvement of the situation, therefore it is possible that the increase in building production is not constant. The overall indicator of economic sentiment continued in a positive trend in September affected by the increase in confidence in the services sector and among consumers. Confidence in the industry and building sectors again recorded a negative development after last month´s improvement.

Both nominal and real wages recorded a slowdown in the year-on-year growth rate in August when compared with the previous month. The rate of employment considerably decreased in the selected sectors while on a month-on-month basis its decline was more moderate when compared with the previous month. The year-on-year growth rate of employment declined mostly in the wholesale, restaurant and beverage service sectors and in the industry sector in comparison to July. The rate of recorded unemployment reached 12.1% in August and remained unchanged when compared with the previous month.

Jana Kováčová
Spokesperson of the NBS

National Bank of Slovakia
Communications Section
Imricha Karvasa 1, 813 25 Bratislava, Slovak Republic
Tel.: +421-2-5787 2168,+421-2-5865 2168, +421-2-5787 2169, 421-2-5865 2169

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