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Economy in Brief

Eastern Europe CPI Uneven, but Coming Under Control; Energy Plays a Part
by Carol Stone October 6, 2006

Three Central and Eastern European nations reported September CPI data today. There are hints throughout of easing inflation pressures, although these performances remain uneven.

In Estonia, the CPI, seasonally adjusted by Haver Analytics, actually fell in the month, by 0.3%. This followed at 1.1% increase in August and helped pull the year-on-year rate from 5.0% in August to 3.8% for September. Transportation and recreation were the main contributors to the softening.

Slovenia's CPI rose 0.3%, but this was notably less than August's 1.5% advance. The weaker September result pulled the year/year pace down to 2.5%, after stronger figures in four of the previous five months. Here too, transportation contributed to the slowing.

In the Ukraine, inflation remains strong and accelerated through last year, when it was up 13.5% on average over 2004's level. In September, the CPI was up 2.2%, hardly a slower pace at 29.2% annualized, but the year-on-year rates have come down considerably from last year's amounts. The Ukraine experiences wide swings in individual CPI categories, so identifying major forces on the total is an indeterminate process. This country, however, is the one among these three that did not see fuel prices ease in September. They were still going up.

In Estonia and Slovenia, transportation costs declined outright; this included falling motor fuel prices in Slovenia and we assume also in Estonia. In Slovenia, which reports more detail (in the form of the EU's HICP array), airfares also fell. As oil prices begin to drop, we note that such declines benefit every energy-consuming country. We see already how this helps in these two small nations, which are among the earliest to publish their September CPI data. A week ago, Eurostat published its "flash" estimate for the entire EuroZone, and at 1.8% year-on-year, it indicated a notable slowing from prior months, which have been well over 2%.

Consumer Price Indexes Sept 2006 Aug 2006 2005* 2004* 2003*
Estonia, SA, 1997=100 146.2 146.6 138.4 133.0 129.0
  Mo/Mo -0.3 1.1      
  Yr/Yr* 3.8 5.0 4.1 3.0 1.3
Slovenia, SA, 2005=100 103.8 103.5 100.0 97.6 94.2
  Mo/Mo 0.3 1.5      
  Yr/Yr* 2.5 3.3 2.5 3.6 5.6
Ukraine, SA, 2005= 100 112.4 110.0 100.0 88.1 80.8
  Mo/Mo 2.2 1.3      
  Yr/Yr* 9.1 7.4 13.5 9.0 5.2
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