Tuesday, June 12, 2012

Romania May Inflation Stays at Post-Communist Low on Food Prices

Romania’s inflation rate remained at a two-decade low in May as food-price declines canceled out growth in services and non-food prices.

The annual rate stood at 1.8 percent for a second month, the Bucharest-based National Statistics Institute said today by e-mail. The figure matched the median estimate of 1.8 percent of nine economists surveyed by Bloomberg. Consumer prices grew 0.2 percent in the month.

As the country’s inflation, the fastest in the European Union last year, slowed to record lows over the past six months, Romanian policy makers had room to reduce the benchmark interest rate to an all-time low of 5.25 percent as the economy entered a technical recession in the first quarter.

Inflation will probably quicken from May because of a statistical base effect, through the rate won’t exceed the 4 percent upper limit of a target range for this year, according to the central bank. It forecasts inflation will end 2012 at 3.2 percent before slowing to 3 percent next year.

Food prices fell 2.1 percent in May from a year earlier, compared with a 1.9 percent drop in April, according to the institute. Price growth for non-food items accelerated to 3.3 percent from a year earlier, compared with 3.2 percent in April, the institute said.

Service-price growth accelerated to 6.2 percent in May from a year ago from 6 percent in the previous month as the leu fell to a record low against the euro and boosted telephone bills, postal service prices and other items denominated in euros, the institute said.

Industrial output rose a seasonally adjusted 2.6 percent in April from a year earlier, after it posted a 0.5 percent annual increase in March, the Statistics Institute said today in a separate release. Output grew 1.1 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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