According to the first flash estimate of the Croatian CPI for June 2024, CPI remained flat on a MoM basis, while the YoY increase was 2.4%. Additionally, the Croatian HICP, which facilitates comparisons with other European countries, is projected to rise by 0.8% MoM and 3.4% YoY.
The Croatian Bureau of Statistics (DZS) released the latest CPI flash estimate yesterday. The report indicates that the Croatian CPI remained stagnant on a monthly basis but saw a 2.4% increase compared to the previous year. In contrast, Slovenia’s Statistical Office (SURS) released its CPI data on Monday, showing Slovenia experienced a 0.4% MoM inflation increase, while a YoY increase that was 0.9 p.p. lower than Croatia’s.
Examining the main monthly drivers of growth, services increased by 0.6% MoM, followed by a 0.3% rise in the food, beverages, and tobacco category. Energy prices saw the largest monthly decline of 1.2% and were the only category to record a YoY decrease of 0.5%. The non-food industrial goods category (excluding energy) reported a 0.2% MoM decrease and had the lowest annual increase of 1.5%. The food, beverages, and tobacco category had the second-largest annual change with a 2.1% increase. The primary driver of CPI growth on an annual basis was services, which saw a 5.5% increase.
Croatian CPI YoY growth rate (February 2013 – June 2024, %)
Source: Croatian Bureau of Statistics, InterCapital Research
For making comparisons with other European countries, the Harmonized Index of Consumer Prices (HICP) should be used. As of June 2024, the Euro area inflation rate stands at 2.5% YoY. In Croatia, the HICP is 3.4% YoY and 0.8% MoM.
HICP comparison between Euro area countries (May 2024, YoY, %)
Source: Croatian Bureau of Statistics, InterCapital Research
On a YoY basis, Croatia ranks third, tied with the Netherlands, while Spain is in second place with a 3.5% increase. Belgium again has the highest expected inflation at 5.5%. In contrast, Finland and Italy have the lowest expected HICP rates at 0.6% and 0.9% YoY, respectively.
On a MoM basis, Croatia is among the countries with the highest inflation expectations at 0.8%, following Malta and Greece, which are leading with 1.3% and 1% increases, respectively.
For context, Slovenia’s HICP is at 2.4% YoY, but it is one of six countries expected to have no inflation growth on a monthly basis. Portugal is the only country expecting a decrease, with a 0.3% MoM decline.
HICP comparison between Euro area countries (June 2024, MoM, %)
Source: Croatian Bureau of Statistics, InterCapital Research
Overall, Croatian inflation seems to be still above the 2% target set by the ECB. Inflation did get tempered in the Euro area overall, at 2.5% as already mentioned. However, what’s more worrying for Croatia is the fact that as part of the Euro area, if the inflation continues to decline in the area, and Croatian inflation remains elevated, interest rate cuts could fuel its growth even further. At the same time, the inflation is mostly seen in Services, which is mostly related to tourism activities, and in food, beverages & tobacco, which is more related to personal consumption. Neither of these categories is influenced directly by higher/lower interest rates. As such, it will be interesting to see how the situation will develop moving forward.
