IME

Prices Keep on Rising in March

Автор: Krasimir Petkashev / 11.05.2011

March is another month of rising prices. According to NSI data, the overall consumer price index (CPI) marks a monthly increase of 0.6% and compared to March 2010 the increase is 5.6%. The last time the annual inflation rate was over 5% had been recorded in February 2009, after which its rate fell gradually (less than 2%), but by July 2010 a new rise began.

As in recent months, the increase in consumer prices continues to be determined almost entirely by soaring food and fuel prices, which is a global trend. There is a consensus that the era of cheap food and oil is over. Data for March once again support this claim. Transportation services mark highest price increase - 1.8 percent, food and beverages - 1.3 percent. Fuel prices in March were up - diesel is more expensive by 2.9%, petrol A95H and A98H by 2.7% and 2.6% respectively.

As far as foods are concerned, higher inflation for the month is reported for cabbage (46.5%) and sugar (15.1%), while cucumbers’ and tomatoes’ prices fell by 14.7% and 9.9% respectively.

Higher costs for food and transportation lead to a decline in demand for other consumer goods and that pushes their prices downward. Last month, prices for health services deflated by 0.2%, prices of services related to entertainment, culture and leisure time decreased by 0.7%, clothes and shoes also became cheaper by 0.3%. What is happening is a sign that household budgets are still under pressure and demand is switched towards goods and services of necessity. Other goods consumption is left for better times.

Soaring food and oil prices last year have caused an increase in inflation worldwide, prompting protests and even riots in some countries. In Bulgaria discontent raises as well so demands for higher incomes come as no surprise. The Social Minister Totyo Mladenov, who devoted himself to a minimum wage increase this year, joined the unions and pensions increase is likely to follow (just before the elections). At the same time no money in the budget for higher pensions and wages is provided. Finance Minister Djankov opposed the social minister’s demands this time, but will he be able to resist the pressure later this year is to be seen. We are now witnessing a classic stage for starting the prices-wages spiral, which further destabilizes prices. In the fragile recovery we are experiencing now, such requests are so to say irresponsible.