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Core inflation in September 2016

Date: 12-10-2016

NBP data: In September 2016, inflation net of food and energy prices stood at -0.4% In the same period, the CPI index amounted to -0.5% (y/y).

On 12 October, Narodowy Bank Polski posted data on the September core inflation readings. In year-on-year terms, inflation:

  • excluding administered (state-controlled) prices stood at -0.6%, as compared with -0.8% in the previous month;
  • excluding the most volatile prices amounted to 0%, the same level as in the previous month;
  • net of food and energy prices amounted to -0.4%, the same level as the month before;
  • the so-called trimmed mean (excluding the impact of 15% of the price basket characterised by the highest and lowest growth rates) was running at -0.1%, compared to -0.2% the month before.

In 2016, all the published core inflation measures have persisted at very low levels, most of them running close to their historical lows (except for inflation excluding administered prices). The CPI (consumer inflation) index for September 2016, announced by GUS on 11 October, stood at -0.5% (y/y) . This reading was in line with the flash GUS estimate.

The CPI index was under upward pressure from energy price growth, which picked up by 2.9 pp (to -2.4% y/y in September 2016), on the back of a rise (of 3.4% m/m) in the prices of fuel designated for private means of transport and in gas prices (of 0.4% m/m). The steeper price growth in these groups was additionally boosted by the base effect (sharp declines in the prices of fuel and the approved lower gas rates in September 2015). This translated into a 0.5 pp. rise in the CPI index. An influence working in the opposite direction was a decline in the prices of food and non-alcoholic beverages – to -0.4% y/y in September (as against 1.2% y/y in August 2016), which accounted for a CPI fall of approx. 0.2 pp. In the food price group, the fall in vegetable prices was particularly marked, as a phenomenon untypical of this month. Slow annual growth in the prices of vegetables was further dragged down by the negative base effect (related to last year's drought).

Narodowy Bank Polski computes the four core inflation indices on a monthly basis in order to highlight the nature of inflation developments in Poland. The CPI only shows average price movement across the whole broad basket of consumer goods. By calculating core inflation indices we can address price changes in various segments of the basket. Thus, sources of inflation can be identified more precisely, and future trends forecast more accurately. Furthermore, it can be determined to what degree the observed inflation trend is a lasting phenomenon, and to what extent it is driven by, for example, short-lived price hikes triggered by incidental factors.

The core inflation measure most frequently used by analysts is inflation excluding food and energy prices. It captures movements in prices which are fairly responsive to the central bank's monetary policy. On the other hand, energy prices (including fuel prices) are not set domestically, but determined in the global markets, sometimes as a result of speculation. Also, food prices are largely dependent on, among other things, the weather and conditions prevailing in the domestic and worldwide agricultural market.

See also: The September 2016 core inflation data »

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