The biggest contribution to the CPI increase on the annual level on average was by Food and non-alcoholic beverages, at 19%, followed by Restaurants and hotels, at 17.1%, Furnishings, household equipment, and routine household maintenance, at 16.1%, and Housing, water, electricity, gas and other fuels, at 16%.
Yesterday the Croatian Bureau of Statistics (DZS) published the latest report on the developments recorded by the Croatian Consumer price indices (CPI), for December 2022. At the annual level, the CPI in Croatia increased by 13.1% (November amounted 13.5%), while on a monthly level, it finally decreased by 0.3%. It should be noted that December represents the first month this year with MoM prices decreasing. Finally, as an annual average, it grew by 10.8%. This would mean inflation is starting to slow down, but still putting continued pressure on households and companies alike.
CPI (January 2013 – December 2022, %)
Source: DZS, InterCapital Research
Breaking this growth on the annual level, the biggest contribution came from the following categories: Food and non-alcoholic beverages, which increased by 19%, Restaurants and hotels, which increased by 17.1%, Furnishings, household equipment and routine household maintenance, with the growth of 16.1%, Housing, water, electricity, gas and other fuels, with 16%, Clothing and footwear, with 12.1%, Miscellaneous goods and services, with 11.5%, Recreation and culture, with 9.6%, Transport, with 8.4%, Alcoholic beverages and tobacco, with 5.3%, and finally, Health, at 4.6%.
This data would mean that inflation has truly taken hold of most of the economy; what started with higher food & beverages, and later on higher energy costs, has now spilled over to the majority of the segments of the economy, which would imply that the pressure from inflation is still quite strong. Furthermore, as the CPI is a composite of different categories with different weights in the index itself, these categories have varying impacts on the changes it records. In December 2022, Food and non-alcoholic beverages contributed 4.93 p.p. to the overall CPI, followed by Housing, water, electricity, gas and other fuels at 2.7 p.p., Transport, at 1.24 p.p., Furnishings, household equipment and routine household maintenance, at 0.92 p.p., Restaurants and hotels, at 0.85 p.p. This would mean that the food&beverages contributed 37.6% of the overall inflation growth, and if combined with the next 2 categories, this would amount to 67.7%.
CPI change by categories (December 2022, YoY, %)
Source: DZS, InterCapital Research
Finally looking at the monthly level, we finally see prices stabilizing. The highest decrease contributing to overall lower CPI MoM prices was recorded by Transport, at 4% decline. Transport is followed by Clothing and footwear, at -2.8% and Housing, water, electricity, gas and other fuels, at -0.6%. On the other hand, the biggest monthly increase was recorded for Food and non-alcoholic beverages with 1% growth in prices to slightly offset mentioned decreases in the CPI.
Even as December was the first month we finally witnessed lower prices, for January 2023 it is expected for CPI numbers to be further elevated by „euro-inflation“ regarding Croatia’s entrance into EMU. It is a common case for countries that adopted Euro as their currency. Higher prices were reported, which was correlated with conversion dates. The total conversion effect on inflation was previously expected to amount to somewhere around 0.5 p.p., further boosting current CPI numbers, as previously reported in the countries that adopted the euro. However, this impact could be understated taking into the account current price increases we are witnessing in Croatia. All things considered, it will be especially interesting to see inflation development in the upcoming months.
By the end of December 2022, BET decreased by 0.57% MoM, and on the YoY basis, it declined by 10.7%, ending December at 11,663.65 points.
The Bucharest Stock Exchange, published its monthly trading report for December 2022, while also commenting on 2022 as a whole. According to the report, 2022 was a year of all-time highs in terms of the total trading value recorded. This pertains to all markets with all types of financial instruments, with the total transactions exceeding RON 24bn. The average daily liquidity reached a new high, at RON 95.6m (EUR 19.4m), an increase of 11% compared to 2021. Also, they noted that BVB share itself, increased by 38% during the year, marking the best performance in the BET index.
It is noted that these results were achieved despite a difficult regional and international situation, marked mainly by the war in Ukraine, the increase in monetary policy interest rates, double-digit inflation rates, the persistence of inflationary phenomenon, the increase in energy prices, as well as the disruption of supply chains. As such, almost all regional and global indices recorded declines, but BET managed to decline less than say, S&P500 in the US or STOXX600 in the EU. In fact, even though the BET index dropped by 10.7% by the end of the year, BET-TR, which also takes into account the dividend yield, fell by only 1.9%. Compared to these, STOXX600 fell by 12.9%, while S&P500 declined by 19.4%.
Moving on to the monthly data, total equity turnover amounted to RON 2.07bn (EUR 421m) in December 2022, representing a 2.5x increase MoM, and 1.6x times increase YoY. However, it should be noted that a lot of this turnover (RON 1.15bn or EUR 233m) came as a result of the ABB of OMV Petrom, during which over 1.78bn shares of the Company were sold by Fondul Proprietatea.
Performance of BET constituents in December 2022 (MoM, %)
Source: Bloomberg, InterCapital Research
Looking at the BET index and its constituents, on an MoM basis, 9 out of 20 companies recorded growth. However, 5 companies are within +/-1%, and as such, the changes are minuscule. Of the largest gainers, Transgaz and MedLife both increased by 8%, followed by Electrica at 7%, Fondul, and BVB at 6%, and Transelectrica and Transport Trade Services at 4%. On the other hand, OMV Petrom declined the most, at 9%, followed by Romgaz at 6%, and Sphera Franchise Group, at 4%.
Performance of BET constituents in 2022 (YoY, %)
Source: Bloomberg, InterCapital Research
On a YoY basis, the largest increase was recorded by the already mentioned BVB, at 38%, followed by Transgaz at 17%, and Transport Trade Services and Fondul Proprietatea, both at 3%. The remaining companies all recorded decreases, meaning that 16 out of 20 companies declined in 2022. Of these, the largest declines were recorded by TeraPlast, at 44%, followed by Purcari at 43%, Aquila, at 41%, MedLife, at 29%, BRD, at 27%, and Digi, at 23%.
Overall, it could be said that 2021 was a year of growth and recovery for the Romanian equity market, and while 2022 was one of continued growth and expansion as well, the returns on the stocks, for the most part, weren’t reflective of that, but considering just the amount of outside pressures facing these companies, it isn’t surprising.