Cyprus HICP inflation ticks up in August

The EU-harmonised consumer price inflation rate (HICP) increased only slightly in August, rising to 1.5% on the year-earlier period, compared with 1.3% in July.

On a month-on-month basis, the HICP was 0.7% higher than July.

The mild increase in inflation despite a rapid rise in oil prices is explained by sharp drops in some important categories. For example, prices of clothing and footwear were 4.4% lower in August 2005 than they were in August 2004, indicating that either retailers severely squeezed their profit margins during the summer sales season, or were able to source products from cheaper suppliers.

From January 2005, all EU states saw a rapid rise in imports of textile products from China, after the global quota regime ended. Intense lobbying from some EU members has led to quotas being reimposed by the EU for a temporary period.

Prices of communications also fell compared with the year-earlier period, by 9.7%, as the dominant telecoms provider CyTA battles it out with the regultors over price cuts.

The rising price of oil, on which Cyprus depends for over 90% of its electricity supply, is reflected in a 9.8% increase in the prices of housing, water electricity and gas in August 2005, compared with August 2004. For similar reasons, prices of transport rose year on year by 2.7%.

The price of education was 5.6% higher in August 2005 than in August 2004, thanks to a big hike in education prices last September and October at the beginning of the 2004/05 academic year.

Harmonised inflation for the year-to-date period was 2.1%.

Fiona Mullen