The biggest contribution to the CPI increase on the annual level on average was by Food and non-alcoholic beverages, at 19%, followed by Restaurants and hotels, at 17.1%, Furnishings, household equipment, and routine household maintenance, at 16.1%, and Housing, water, electricity, gas and other fuels, at 16%.
Yesterday the Croatian Bureau of Statistics (DZS) published the latest report on the developments recorded by the Croatian Consumer price indices (CPI), for December 2022. At the annual level, the CPI in Croatia increased by 13.1% (November amounted 13.5%), while on a monthly level, it finally decreased by 0.3%. It should be noted that December represents the first month this year with MoM prices decreasing. Finally, as an annual average, it grew by 10.8%. This would mean inflation is starting to slow down, but still putting continued pressure on households and companies alike.
CPI (January 2013 – December 2022, %)
Source: DZS, InterCapital Research
Breaking this growth on the annual level, the biggest contribution came from the following categories: Food and non-alcoholic beverages, which increased by 19%, Restaurants and hotels, which increased by 17.1%, Furnishings, household equipment and routine household maintenance, with the growth of 16.1%, Housing, water, electricity, gas and other fuels, with 16%, Clothing and footwear, with 12.1%, Miscellaneous goods and services, with 11.5%, Recreation and culture, with 9.6%, Transport, with 8.4%, Alcoholic beverages and tobacco, with 5.3%, and finally, Health, at 4.6%.
This data would mean that inflation has truly taken hold of most of the economy; what started with higher food & beverages, and later on higher energy costs, has now spilled over to the majority of the segments of the economy, which would imply that the pressure from inflation is still quite strong. Furthermore, as the CPI is a composite of different categories with different weights in the index itself, these categories have varying impacts on the changes it records. In December 2022, Food and non-alcoholic beverages contributed 4.93 p.p. to the overall CPI, followed by Housing, water, electricity, gas and other fuels at 2.7 p.p., Transport, at 1.24 p.p., Furnishings, household equipment and routine household maintenance, at 0.92 p.p., Restaurants and hotels, at 0.85 p.p. This would mean that the food&beverages contributed 37.6% of the overall inflation growth, and if combined with the next 2 categories, this would amount to 67.7%.
CPI change by categories (December 2022, YoY, %)
Source: DZS, InterCapital Research
Finally looking at the monthly level, we finally see prices stabilizing. The highest decrease contributing to overall lower CPI MoM prices was recorded by Transport, at 4% decline. Transport is followed by Clothing and footwear, at -2.8% and Housing, water, electricity, gas and other fuels, at -0.6%. On the other hand, the biggest monthly increase was recorded for Food and non-alcoholic beverages with 1% growth in prices to slightly offset mentioned decreases in the CPI.
Even as December was the first month we finally witnessed lower prices, for January 2023 it is expected for CPI numbers to be further elevated by „euro-inflation“ regarding Croatia’s entrance into EMU. It is a common case for countries that adopted Euro as their currency. Higher prices were reported, which was correlated with conversion dates. The total conversion effect on inflation was previously expected to amount to somewhere around 0.5 p.p., further boosting current CPI numbers, as previously reported in the countries that adopted the euro. However, this impact could be understated taking into the account current price increases we are witnessing in Croatia. All things considered, it will be especially interesting to see inflation development in the upcoming months.
