The headline consumer price inflation in Romania rose to 3.24% in April from 3.05% in March, reaching the steepest level since January 2020. Half of this (1.55pp) was due, in roughly equal parts, to the rise of the prices of electricity (+17% yoy) and fuels (+8.7% yoy).

The disinflation episode, which began in mid-2018 has visibly reached its end and the National Bank of Romania (BNR) announced it had already revised upward its inflation forecast to be published along with the quarterly Inflation Report on May 14. Under the previous forecast published in March, BNR projected 3.24% yearend inflation for 2021 and 2.8% for 2022.

Although half of the April inflation was caused by only two items, this does not necessarily mean that its increase (compared to March) overstates a trend or reflects increased volatility.

The energy prices, including those of electricity and fuels, as well as those of other commodities (as pointed out by the BNR in its monetary policy decision earlier this month), are likely to rise as the global economy recovers. The trend toward more renewable energy is also likely to contribute to higher prices.

The food prices in Romania increased by only 0.76% in May 2021, compared to the same month last year. The prices of non-food items increased by 5.21% yoy - and contributed 2.54pp to the overall inflation in May. Out of this, 1.55pp was due to the two elements (electricity and fuel) and yet it remains a 1pp contribution that can be interpreted in connection with the robust sales of non-food items as witnessing demand-side inflationary drivers.

The average prices of services in May increased by 2.6% yoy with the prices of the medical care (+5.27% yoy) making the strongest single contribution (+0.1pp).

iulian@romania-insider.com

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