According to the flash estimate released on Friday, the Croatian CPI increased by 6.6% YoY, and 0.4% MoM in September 2023.
On Friday, the Croatian Bureau of Statistics released the latest flash estimate of the Croatian CPI, for the month of September 2023. According to the estimate, the Croatian CPI grew by 6.6% YoY, and 0.4% MoM. Even though this might seem like a decrease on a YoY basis, this would come from the higher base in the same month last year, rather than the genuine slowdown in price growth. The continued MoM increase (0.4% MoM this month, 0.6% MoM last month) means that inflation growth is far from over.
Croatian CPI YoY growth (February 2013 – September 2023, %)
Source: Croatian Bureau of Statistics, InterCapital Research
According to the main components of the index, on a YoY basis, Food, beverages, and tobacco growth is estimated at 9.6%, followed by Services at 6.9%, Non-food industrial products without energy at 4.6%, and Energy, at 3.9%. On a monthly basis, the largest increase was recorded in Non-food industrial products without energy, at 2.4%, and Energy, at 1.5%. On the other hand, Services decreased by 1% MoM, while food, beverages, and tobacco declined by 0.6%. In terms of the harmonized index of consumer prices (HICP), on a YoY basis, an increase of 7.3% was recorded, while on the other hand, on a MoM basis, a decrease of 0.7% was recorded. It should be noted that the difference between HICP and CPI is that CPI refers to spending by only domestic, private households in a given country, while the HICP also takes into account spending by foreigners. Also, HICP can be used to compare to other European countries, unlike the CPI.
Comparison of HICP growth with available European countries (September 2023, YoY, %)
Source: Eurostat, InterCapital Research
On a YoY basis, the largest increase in HICP was recorded by Slovakia, at 8.9%, followed by Croatia at 7.3%, and Slovenia at 7.1%. On the other hand, the lowest HICP was recorded by the Netherlands, at -0.3% YoY, followed by Belgium at 0.7%, Greece at 2.4%, and Finland, at 3%. In the entire Euro area, the growth amounted to 4.3% YoY.
Comparison of HICP growth with available European countries (August 2023, MoM, %)
Source: Eurostat, InterCapital Research
On an MoM basis, the largest increase was recorded by Greece, at 1.9%, followed by Italy at 1.7%, Austria at 1%, and Portugal at 0.8%. On the other hand, Netherlands and Malta recorded decreases of 0.8%, each, respectively, followed by Croatia at 0.7%, and France at 0.6%. In the entire Euro area, the growth amounted to 0.3% MoM.
Taking all of this together, the inflation growth it seems is far from over in Croatia. The decrease in HICP MoM vs. CPI MoM could be attributed exactly to the tourism industry, as August is the most prominent month with the most arrivals and overnight stays, and thus on average highest service prices. As such, a decrease in the MoM HICP is expected, as fewer foreign tourists are present to contribute to inflation growth. The CPI MoM, however, is one that is really troubling. With the coming of winter, and the possibility of higher energy (especially oil and gas), and electricity prices, a return of inflation to desirable levels would be hard to achieve. Of course, the Croatian government has already stated its willingness and plans to help those in need, both companies and individuals. This should help with the inflationary pressures they face, but would also come at a cost of increasing the amount of money in circulation. This is especially important, as an increase in the amount of money in circulation is the opposite of what the ECB’s current restrictive monetary policy (which increases interest rates) is trying to achieve.
