By the end of August 2023, industrial producer prices on the domestic market grew by 0.8% MoM, and 4.0% YoY.
According to the latest report on the industrial producer prices in Croatia released on Friday by DZS, they have continued growing in August. On the domestic market, the growth amounted to 0.8% MoM and 4.0% YoY. If we were to look at the total growth of these prices, excl. Energy, an increase of 0.1% MoM, and 3.7% YoY was recorded. As compared to 2015, the industrial producer prices have increased by 46.7%, and if we were to exclude Energy, they grew by 17.7%.
Industrial producer prices YoY growth (January 2021 – August 2023, %)
Source: DZS, InterCapital Research
Breaking the MoM growth by segments, Energy recorded an increase of 2.2% MoM, Non-durable consumer goods increased by 0.3%, Capital goods by 0.2%, while Durable consumer goods and Intermediate goods recorded a decrease in prices, of 0.6% and 0.2% respectively. Meanwhile, on a YoY basis, the largest increase was recorded in Non-durable consumer goods, with growth of 6.8% YoY, followed by Energy at 4.7%, Durable consumer goods at 4.4%, Intermediate goods at 0.6%, and Capital goods at 0.5%.
Furthermore, on an MoM basis, producer prices in Manufacturing grew by 1.8%, in Electricity, gas, steam and air conditioning supply by 1.3%, in Water supply; sewage, waste management and remediation activities by 0.7%, while a notable decrease of 21.3% was recorded in Mining and quarrying. Meanwhile, on the YoY basis, growth in Electricity, gas, steam and air conditioning was the largest, at 15.4%. Following it, a 2.4% growth was recorded in Manufacturing, as well as a 0.6% increase in Water supply; sewerage, waste management and remediation activities. On the other hand, a decrease of 29.7% was recorded in Mining and quarrying.
The continued growth of industrial producer prices does not bode well for the downstream consumer prices, as higher costs mean that at least partially, these costs will be passed over to consumers. As Croatia recorded one of the largest increases in CPI in the EU during August 2023 (at 7.8% YoY, or 8.5% according to HICP, more on which you can read here), the industrial producer prices are sure to continue to support the elevated inflation rate. Combined with the growth in the tourism industry prices, as well as the overall housing prices growth, it doesn’t seem that what has been done thus far has done a lot to curb the price growth. Of course, the main way that the elevated inflation is being influenced is by the increase in the interest rates, in this case, the ECB’s key interest rates. While these can be effective in reducing borrowing, and consumption, and sending an overall signal that right now might not be the best time for expansion (hence the name, restrictive monetary policy), it can do little to influence the growth in say, commodity prices. What’s more, after months of elevated energy prices, which influence all industries to a lesser or greater extent, inflation has spilled over to other segments. This is most evident in the food and beverage prices. Given all of these reasons, it could be expected that we see continued price growth in the coming period, especially if the prices of energy start increasing as colder weather comes.