Yesterday, the Croatian Statistical Office published the Croatian CPI development. According to the release, in July 2023 the Croatian CPI increased by 7.3% YoY, and 0.2% MoM.
The latest Croatian CPI numbers show us that even though the CPI has been on a downward trend on a YoY basis, on an MoM basis, it still continues growing. The main reason for this is the base effect: the inflation was already high in the same period last year, meaning that growth compared to that base is lower. This doesn’t necessarily mean that the price growth isn’t slowing down, only that the significant factor for the reduction in the price growth (on a YoY basis) is due to the said base effect.
Croatian CPI (February 2013 – July 2023, %)
Source: DZS, InterCapital Research
Overall, the CPI increased by 7.3% YoY, while it grew by 0.2% on a MoM basis. Breaking this growth on the annual level, the biggest contribution came from the following categories: Restaurants and hotels, which increased by 14.6% (contributing by 0.73 p.p. to total CPI YoY growth), Food and non-alcoholic beverages, which increased by 12.6% (+3.34 p.p.), Clothing and footwear at 11.3% (+0.69 p.p.), Miscellaneous goods and services, with 10% (+0.62 p.p.), Furnishings, household equipment and routine household maintenance, with 9.3% (+0.54 p.p.), Recreation and culture, with 7.5%, Health, with 7.1% and Alcoholic beverages and tobacco as well as Housing, water, electricity, gas and other fuels with 6.4% increase.
CPI change by categories (July 2023, YoY, %)
Source: DZS, InterCapital Research
Meanwhile, on a monthly basis, the highest increase on average was recorded in the divisions Restaurants and hotels at 4% due to the season. Further, the trend in the decline of Energy prices (on a YoY basis) has been evident for a while now, as these prices have stabilized after their highest point recorded during the winter of 2022/2023. The increase across other categories is why inflation is considered “sticky” at this point, and the main reason why ECB still continues to increase interest rates.
Finally, we are going to take a short look at Eurostat’s inflation data that tracks a Harmonised Index of consumer prices (known as HICP), which allows for consumer prices to be compared across countries. Looking at the inflation rate for Croatia, we can notice an 8.1% inflation, according to HICP. To put things in context, inflation in Euro Area currently amounts to 5.3%. Finally, we would like to emphasize that Slovenia has an inflation rate much closer compared to Euro Area, amounting to 5.7%.
