Austria: Inflation relief - ING

Austrian inflation came in at 1.9% YoY in May, from 2.1% YoY in April, on the back of much weaker fuel price increases, explains Inga Burk, Economist at ING.

Key Quotes

“Looking at the breakdown of May’s inflation data, the drop in headline inflation was mainly driven by a much weaker price increase in fuels year-on-year. Restaurant services, food and rents remained important price drivers.”

“In contrast to the drop in headline inflation, daily life became noticeably more expensive. The micro basket, or out-of-the-pocket inflation measure, which represents typical daily shopping purchases, came in at 3.3% YoY in May from 2.5% YoY in April. Meanwhile the mini basket, representing weekly purchases and also fuels, became 3.0% YoY more expensive compared to 3.7% in April.”

“On a monthly basis, prices increased by 0.1%, driven by a sharp rise in meat prices. Turning to the HICP measure of inflation, the inflation rate came in at 2.1% YoY from 2.3% YoY in April.”

“Despite the robust economic upturn and healthy employment gains, wages will not be an impetus for inflation this year. That's because wage agreements were already completed by the end of 2016 and at the beginning of this year. Overall, wage settlements showed a nominal wage increase of 1.5%. It is not until next year that wage settlements could surge due to this year’s higher inflation rate.”

“Draghi's lynchpin, wages, will definitely not be put to the test in Austria.”