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Core Inflation in December 2019

Date: 16-01-2020

NBP data: In December 2019, inflation net of food and energy prices stood at 3.1%., The CPI index stood at 3.4% (y/y) in the analysed period.

On 16 January 2020, Narodowy Bank Polski posted data on core inflation indices in December 2019. In year-on year terms, inflation:

  • excluding administered (state-controlled) prices stood at 3.6%, compared to 2.8% in the previous month;
  • excluding the most volatile prices amounted to 2.8%, compared to 2.6% in the previous month;
  • inflation net of food and energy prices amounted to 3.1%, compared to 2.6% the month before;
  • the so-called 15% trimmed mean (excluding the impact of 15% of the price basket characterised by the highest and lowest growth rates) was running at 2.5%, compared to 2.1% the month before.

In December 2019, CPI inflation picked up to 3.4% y/y. The higher inflation was driven by increases in all major CPI groups a rise in the prices in all the main CPI categories. The largest contributors to CPI growth were:

  • an increase in the growth in the prices of fuel for private means of transport, to 0.0% y/y, compared to -5.4% in November 2019. This was a result of a rise in oil prices in the global markets combined with the fading of the statistical effect of a decline in fuel prices in December 2018. The contribution to CPI growth was approx. 0.3 pp.
  • a rise in service price growth to 5.9% y/y, from 5.1% in November 2019, mainly as a result of higher prices of insurance and transport services, particularly air fares. The contribution to CPI growth was approx. 0.2 pp.
  • steeper growth in the prices of food and non-alcoholic beverages (6.9% y/y compared to 6.5% in November 2019) – driven by a rise in the prices of pork, cured meats and, consequently, meat in general, due to, among others, the ASF epidemic in China. At the same time, vegetable and fruit prices were observed to rise more slowly. The contribution to CPI growth was approx. 0.1 pp.
  • an increase in the growth of non-food product prices to 0.7% y/y, compared to 0.4% in November 2019 - mainly as a consequence of a weaker seasonal drop of clothing and footwear prices than a year ago, and a rise in vehicle prices The contribution to CPI growth was approx. 0.1 pp.
Higher CPI inflation was accompanied by an increase across all the measures of core inflation. Inflation net of food and energy prices stood at 3.1% y/y in December 2019 (a rise of 0.5 pp on the November level).

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 e.g. short-lived price changes triggered by incidental factors.

The core inflation measure most frequently used by analysts is inflation excluding food and energy prices. It captures trends in prices of those prices of goods and services 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: Core inflation data »

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