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UPDATE 1 - Croatia's Aug annual inflation lands near Erste's expectations

UPDATE 1 - Croatia's Aug annual inflation lands near Erste's expectations Author: Georgi Georgiev. License: All rights reserved.

ZAGREB (Croatia), September 16 (SeeNews) - Croatia's consumer prices rose by 0.8% year-on-year in August, coming close to the rate of increase expected by analysts at Austria-based Erste banking group, Erste said on Monday. 

August inflation has landed close to Erste's expectations of 1.0% price growth, the group said in an instant comment after Croatia's statistical office published the inflation data earlier on Monday.

In July, Croatia's annual consumer price inflation was 1.1%.

Erste analysts said inflation in Croatia remains in tight band, adding that they continue to see average inflation around 1% in 2019.

The banking group also said that the announced cut in value added tax (VAT) rate by 1pp from January should have one-off deflationary impact next year. In July, the Croatian government reaffirmed its intention to cut VAT to 24% in 2020 from current 25%.

"Looking forward, demand-side pressures should accelerate only marginally, reflecting a strong consumption profile, while supply side remains mostly sensitive to energy prices, which for the time being look quite comfortable," Erste noted.

The statistical office data showed that prices of food and non-alcoholic beverages, which have the largest weight of 27.81% in the consumer basket, rose 0.3% year-on-year in August, after growing by the same percentage in July.

Prices of housing, water, electricity, gas, and other fuels, with a 16.44% weight, added 3.8% in August - after increasing by 3.9% in the month before. Prices of transport services, which have a 12.43% weight, however, decreased by 1.6% in August, following a drop of 1.1% in the previous month.

Croatia's average annual inflation accelerated to 1.5% last year, from 1.1% in 2017.