Cyprus inflation reached 2.4% in 2010

The consumer price inflation rate rose to 2.4% in 2010, compared with 0.3% in 2009, according to the latest figures from the Statistical Service.
The main reason for the increase, according to our analysis, was a sharp rise in prices of “housing, water, electricity and gas”, which rose by 7.6%, having dropped by 2.5% in 2009.
This category is heavily influenced by the price of oil, which has risen from around USD 75 per barrel at the beginning of 2010 to around USD 92 per barrel by the end.
By contrast, a fall of 0.7% was recorded in the price of clothing and footwear, reflecting weak demand in this sector. The latest available data show that sales of textiles, clothing and footwear fell in volume terms by 1.9% over the year earlier in January-September.
Weak demand was also reflected in the prices of furnishing, household equipment and supplies, which prices rising by only 0.2% in 2009. Retail sales of electrical goods and furniture were down 2.9% in the first nine months of 2009.
One interesting trend was the smaller than usual increase in the prices of restaurants and hotels. Since Cyprus adopted the euro in January 2008, it feels like restaurant and coffee shop prices have soared.
However, in 2010, prices in restaurants and hotels rose by only 2%–much lower than the increases of 7.7% in 2008 and 5.6% recorded in 2009.
With the mushrooming of foreign-branded coffee shops along Nicosia’s Grivas Digeni in the past two years, this might just mean that the market for a EUR 7.00 cup of coffee is now saturated and the multiple new competitors will have to start competing on price.

Fiona Mullen
Director, Sapienta Economics Ltd