NSI Reports Deflation in June – the First in a Year and a Half

Economists comment that price decrease during the summer is something normal and is due to seasonal factors. Nevertheless, this will have a positive effect on people’s income.

The Bulgarian National Statistical Institute (NSI) reported a deflation in June. The data shows that the monthly inflation rate in June was minus 1.7%. This is the first deflation in the last year and a half but according to economists price decrease during the summer is something normal and is due to seasonal factors.

What the figures show

However, NSI data shows that the annual inflation rate remains high. In June 2011 compared to the same month in 2010 it was 4.8%. Since the beginning of the year prices have increased by 1.7%. Foods and non-alcoholic drinks have the greatest effect on prices and their prices fell by 2.4% on a monthly basis. Transportation prices fell by 1%. The decrease in the prices of houses and fuel is 0.1%. However, there is an increase in the prices of alcohol and healthcare of 0.1% on a monthly basis, as the price increase for clothes and shoes is 0.2%.

Within the boundaries of normal

It turns out that to have a deflation in June is something normal and is mainly due to seasonal factors.

“The data is positive and exceeds our expectations”, says economist Desislava Nikolova from the Institute for Market Economics (IME). She explained that according to the Institute’s forecasts the deflation was about 0.3%. According to her the price decrease during the summer months is something normal but this time it will have a very positive effect. Another reason for the price decrease is cheaper fuel prices on the international markets.

The high annual inflation means the monthly deflation will not have bigger influence on the domestic consumption.

Interconnected vessels

According to economists this price decrease will also influence the consumption which will start to recover slowly. “Each deflation leads to an increase in the disposable income”, explains Desislava Nikolova. However, she forecasts a more dynamic consumption in the autumn and winter, when the unemployment rate is expected to fall not due to seasonal factors, but due to real economic factors.

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