Romania’s industrial price inflation turns positive in June on higher energy prices
<p>The industrial price index in Romania rose by 1.9% over the three months in Q2 (Apr-Jun), driven by the 4.4% rise in the energy prices, and the annual industrial price inflation turned into the positive area (+1.1% y/y in June) after nearly a year in the negative territory.</p>

<p>However, a more detailed analysis shows that the energy prices are still much higher compared to those of other industrial goods, and it’s not sure whether this is a sustainable balance or if more corrections are to come.</p>

<p>By major industrial groups, the prices demonstrated diverging annual dynamics: energy prices edged down by 0.6% (on a high base), and the prices of intermediate goods contracted by 1.5% (possibly an effect of subdued industrial activity).</p>

<p>Prices of consumer goods rose moderately (in absolute terms and compared to the 4.9% y/y consumer price inflation): by 1.5% (durables) and 3.5% (non-durables), driven among others by the demand-side factors. The price of capital goods posted the fastest advance: 5.6% y/y. In principle, this might bode well if it is an effect of investments.</p>

<p>But the annual dynamics alone tell only a small part of the story. In absolute terms, the energy prices are 2.2 times higher (+120%) compared to the 2021 average. This is roughly the 120% leap in the energy prices seen from August 2021 to October 2022, when all the European countries were piling up non-Russian natural gas and fighting global heating with more PV panels and wind farms. Not much has changed since then, and as a result, the energy prices haven’t declined significantly. It’s hard to say how much of the 120% rise in energy prices (versus 2021) is due to the decarbonization and how much to the war in Ukraine, but the effect is the same: higher industrial and consumer price inflation and a broad re-negotiation of the relative prices.</p>

<p>The prices in other industries rose less than those of energy, compared to 2021: from +23.5% for the intermediate goods to +35% for the non-durable consumer goods. &nbsp;This may be either because the other industries already accommodated the higher energy prices (by accepting smaller margins) or because they haven’t yet completed the price adjustment cycle.</p>

<p><em>(Photo: <a href="https://www.dreamstime.com/" rel="noopener" target="_blank">Kanok Sulaiman/ Dreamstime</a>)</em></p>

<p><em>iulian@romania-insider.com</em></p>