Tuesday, October 11, 2011

Romanian September Inflation Slows to Lowest Since Communism

Oct. 11 (Bloomberg) -- Romania’s inflation rate fell more than expected in September to the lowest level since the country abandoned communism 21 years ago as a bumper harvest and weak domestic demand lowered food prices.

The annual rate fell to 3.45 percent, within the central bank’s target, from 4.25 percent in August, the National Statistics Institute in Bucharest said today in an e-mailed statement. The decline exceeded the median forecast of 11 economists surveyed by Bloomberg of 4 percent. Prices fell 0.2 percent on the month.

Central banks in eastern Europe including Romania have kept rates on hold in the past month on expectations inflation will slow and the economy will weaken because of slower growth in western Europe, the main importer of goods from the region.

“The near-term inflation outlook continues to improve, thanks to good crop yields domestically and softer commodity prices,” Citigroup Inc. economists Ilker Domac and Gultekin Isiklar wrote in a note to clients before the inflation announcement. “Looking ahead, administrative price adjustments and the risks ahead of the 2012 elections, however, continue to overshadow the outlook.”

The rate will “very likely” fall this year within the central bank’s target of 3 percent, plus or minus 1 percentage point, for 2011 and 2012 on lower food costs and as the effects of a government tax increase dissipate, Deputy Governor Cristian Popa said on Sept. 29.

Food-price growth slowed to 1.7 percent in September from a year earlier, compared with 3.8 percent in August, on plunging potato, vegetable and fruit prices, according to the institute.

Non-food costs dropped to 4.8 percent in last month from 4.9 percent in August, while services prices were unchanged at 3.5 percent the previous month, the institute said.

--With assistance from Barbara Sladkowska in Warsaw. Editor: James M. Gomez

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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