Austria: Inflation flirts with the 1% mark – ING

Inga Burk, Economist at ING, notes that after having been stable for four consecutive months, Austrian inflation saw its sharpest increase since December 2015.

Key Quotes

“The inflation rate climbed to 0.9% in September, after remaining unchanged at 0.6%YoY from May to August. Once again expenses on restaurant services and accommodation were the main inflation drivers with catering services contributing the largest share. Although fuels continued to serve as the main price dampener, their dampening effect is fading out: it can clearly be seen in the numbers (-3.5% YoY, from -8.4% in August).

On a monthly basis, Austrian inflation shot up by 0.7% compared to August with clothing and footwear being the main price drivers because of summer sales while seasonally-priced, low, package tours served as a price dampener. Turning to the HICP measure of inflation, prices even rose to 1.0% on the month, while the inflation rate climbed to 1.1%YoY. Strong price increases for restaurant services and accommodation as well as leisure and recreation made HICP diverge significantly from the CPI.

With September marking the start of the inflation uptick, the times of low inflation rates seem to be over. With negative base effects from low energy prices fading out, stronger consumption and more expensive prices for accommodation, leisure and cultural services (due to the increase in the reduced VAT since May), the inflation rate should keep accelerating. This should result in an annual inflation rate of 1.0% in 2016, well above the inflation rate that we currently expect for the Eurozone as a whole (0.2%).”

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