The latest inflation estimates and prints have been published by the Croatian and Slovenian statistical offices for October 2024. While the inflation has largely died down in Slovenia, remaining the same YoY, and declining by 0.5% MoM, in Croatia, the opposite is happening. While a trend of lower and lower inflation is seen in Croatia, one has to take into account the high base effect. Even with this taken into account, Croatian inflation grew by 2.2% YoY, and 1.1% MoM in October.
Croatia
Starting off with Croatia, it would seem that the inflation story is not yet over, even if it seems to be on its “last legs”. While the inflation has largely died down in the EU, it is still posing issues for Croatia. In October, the CPI growth amounted to 1.1% MoM, and 2.2% YoY.
Croatian CPI YoY growth rate (August 2014 – October 2024, %)
Source: Croatian Bureau of Statistics, InterCapital Research
Delving into this further, on an annual basis, Services recorded 5.1% higher prices, Food, beverages, and tobacco recorded 4.6% higher prices, Non-food industrial goods without energy 0.6% higher prices, while the prices in Energy declined by 4.6% YoY. On a monthly basis, prices in Non-food industrial goods without energy grew the most, at 2.7%, followed by Energy at 1.4%, Food, beverages, and tobacco at 1%, while Services declined by 0.5%.
Having all of this in mind, there are several things that should be pointed out: Energy costs have not only stabilized but have largely dissipated, a trend that has been visible for months now. Services growth was to be expected, as October is considered part of the tourist post-season, and given the bad weather recorded in Croatia in September, it is expected that some bookings were switched to October, leading to higher prices. Prices of Food, beverages, and tobacco have increased as well, driven by personal consumption in Croatia, but also the influx of foreign tourists, which have traditionally led to higher demand during this period for these products.
On a monthly basis, the situation is more volatile and as such does not give a clear indication as to what is going on. One thing is clear though – inflation remains quite sticky in Croatia, especially in food and services. A decrease could be expected in the coming months as the season winds down, although, with the upcoming winter holidays, personal consumption should pick up rather quickly.
Slovenia
For Slovenia, it would seem that they’re on another planet compared to Croatia, at least when it comes to the inflation rate. The differences in the inflation rate could be attributed to the difference in the economy. For example, Croatia has a far larger tourism industry, which definitely drove inflation, while Slovenia’s economy is more diversified into different sectors in which the inflation has largely stopped, such as industrials. As such, the country recorded no annual CPI growth in October, while on the MoM basis, the CPI declined by 0.5%.
Slovenian CPI YoY growth rate (August 2014 – October 2024, %)
Source: SURS, InterCapital Research
Looking more closely at the components of the CPI, Service prices grew by 3.2% YoY, while goods prices declined by 1.6%. Inside goods, Non-durable goods were 2.6% cheaper, durable goods were 1.2% cheaper, and semi-durable goods recorded a 2.1% price growth.
Furthermore, according to SURS, the largest impact on inflation, i.e. 1.3 p.p., came from 8.6% lower prices in the group housing, water, electricity, gas, and other fuels, with electricity prices dropping by almost 23%, followed by decreases in the group transport (-3.1% YoY), leading to 0.5 p.p. lower inflation. On the flip side, prices of alcoholic beverages and tobacco grew by 5%, recreation and culture by 3.3%, and food and non-alcoholic beverages by 1.4%, each contributing 0.3 p.p. to the annual inflation.
The statistical office also noted that there was a change in the method of calculating the network fee for electricity, leading to 9.3% lower prices MoM in October, contributing – 0.3 p.p. to the overall inflation. Furthermore, prices of package holidays decreased by 6.4%, lowering the inflation by another 0.3 p.p. Another -0.1 p.p. to overall inflation was added by lower prices of accommodation (by -4.4% MoM), actual rentals paid by tenants (-2.7%), and motor fuels (-2.3%).
The harmonized index of consumer prices in the EU
Taking a quick look at the harmonized index of consumer prices (HICP), the annual growth rate for Slovenia was still 0%, while on the MoM basis, it was at -0.3%. Meanwhile, for Croatia, the growth rate on an annual basis was 3.5%, while on a monthly basis, it amounted to 0.8%.
HICP change for select EU countries (YoY, October 2024)
Source: Eurostat, InterCapital Research
When compared to the rest of the EU, Croatia recorded 3rd highest inflation (tied with Slovakia), after only Belgium at 4.7% YoY growth, and Estonia at 4.5% increase. Overall Euro area inflation amounted to 2%.
HICP change for select EU countries (MoM, October 2024)
Source: Eurostat, InterCapital Research
Meanwhile, on the MoM basis, Croatia is tied in the 1st place with Estonia and Finland, all 3 having recorded 0.8% MoM inflation. This is above the Euro area’s average of 0.3%.
