Bloomberg News

Romanian June Inflation Quickens Less Than Forecast on Demand

July 10, 2012

Romania’s inflation accelerated less than the central bank and economists estimated in June as weak demand limited price increases.

The inflation rate rose to 2.04 percent, the first increase in eight months, the Bucharest-based National Statistics Institute said today by e-mail. The figure was below the 2.2 percent median estimate of eight economists surveyed by Bloomberg. Consumer prices fell 0.04 percent in the month.

Romania’s inflation outlook, which points to an increase in prices by the end of the year from a record-low 1.8 percent in May and political turmoil that caused the leu to tumble, have prevented policy makers from cutting borrowing costs needed to help the recession-hit economy on June 27.

“Going forward, we look for a moderate upward trend in year-on-year inflation during the remainder of the year, with year-end inflation reaching about 3.5 percent versus the central bank’s most-recent forecast of 3.2 percent,” Citigroup economists Ilker Domac and Gultekin Isiklar said today. “We believe that the possibility of additional administrative price adjustments, a weaker-than-expected leu and a reversal in food prices are the key risk factors requiring close monitoring.”

The central bank had expected inflation to quicken to 2.3 percent at the end of the second quarter because of a statistical base effect. It said the rate won’t exceed the 4 percent upper limit of its target range this year and end 2012 at 3.2 percent before slowing to 3 percent next year.

Food prices dropped 0.9 percent in June from a year earlier, compared with a 2.1 percent drop in May, the institute said. Price growth for non-food items slowed to 3 percent from a year earlier, compared with 3.3 percent in May.

Service-price growth slowed to 5.8 percent from a year ago from 6.2 percent in the previous month, the institute said.

Industrial output fell a seasonally adjusted 0.2 percent in May from a year earlier, after it posted a 2.6 percent annual increase in April, the Statistics Institute said today in a separate release. Output shrank 0.6 percent on the month.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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