Analyses
Inflation risk
in Austria?
January 2014
Bank Austria
Economics &
Market Analysis
Austria
Analyses
Inflation risk in Austria?
Overview
■ Austria reports 2 percent rate of inflation in December
2013, the highest of all eurozone member states for the
first time (eurozone: 1.4 percent)
■ Higher inflation than the eurozone partly attributable to
reasons of economic activity, but also 0.5 percentage points
higher than Germany in 2013
■ Higher inflation than Germany cannot be explained by
economic differences – inflation in Austria has been roughly
one third higher than in Germany since 2007
■ Homemade inflation: administered prices such as fees and
duties have risen twice as fast in Austria since 2007
compared to Germany, coupled with structural features and
to some extent lower competition
■ Austrian inflation also expected to be higher than in
Germany in 2014: Tax and duty increases in March will lift
inflation by roughly one quarter of a percentage point
■ Higher inflation could become a boomerang for
competitiveness in the long term: unit labour costs are
growing faster than in Germany
Authors: Stefan Bruckbauer
Walter Pudschedl
Imprint
Published by UniCredit Bank Austria AG
Economics & Market Analysis Austria
Schottengasse 6-8
1010 Vienna
Telephone +43 (0)50505-41951
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E-Mail: [email protected]
January 2014
Bank Austria Economics & Market Analysis Austria
Page 1
Analyses
Inflation risk in Austria?
Homemade factors behind highest inflation
rate in eurozone
In December 2013 inflation rose to 2 percent year-on-year based on the harmonised index of
consumer prices. This means Austria has the highest inflation of all eurozone member states for
the first time since the start of the price index calculation in the middle of the 1990s. Posting
an annual average inflation rate of 2.1 percent, 2013 was still one of the most stable years for
Austria in terms of prices.
VERY HIGH PRICE STABILITY IN AUSTRIA SINCE THE INTRODUCTION OF THE EURO
CPI (change against prev. year in %)
CPI - average of the relevant decade
10
9
8
7
6
5
4
3
2
1
0
1970
1975
1980
1985
1990
1995
2000
2005
2010
Source: Statistik Austria, Bank Austria Economics & Market Analysis Austria
Compared to the average figure recorded for the eurozone in 2013 of 1.4 percent, the higher
inflation rate in Austria can only partially be explained by different economic developments.
This is because the eurozone inflation rate also comprises price trends in countries such as
Greece, Slovenia or Italy, which were still in recession in 2013 and therefore confronted with
different demand conditions than Austria. Yet Austria also has a much higher inflation rate in
comparison to countries experiencing similar economic developments. Average inflation in
Austria in 2013 was 0.5 percentage points higher than in Germany for example. This cannot be
attributed to economic differences. What is more, this stronger inflationary pressure in 2013 is
not a one-off phenomenon. For some years now, Austrian inflation has been higher than in
Germany.
Bank Austria Economics & Market Analysis Austria
Page 2
January 2014
Analyses
Inflation risk in Austria?
AUSTRIA REPORTS THE HIGHEST INFLATION RATE OF ALL EUROZONE COUNTRIES FOR THE FIRST TIME IN DECEMBER 2013
2.5
HCPI (Dec. 2013, yoy in %)
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
A
EE
FN
LX
NL
DE
BE
MT
SI
FR
EURO
IT
SX
ES
IE
PT
CY
EL
Source: Eurostat, Bank Austria Economics & Market Analysis Austria
Fees and duties have risen twice as fast than in Germany since 2007
A significant part of the higher inflation in Austria compared to Germany can be attributed to
the faster increase in “administered” prices”. The prices for goods and services that are
influenced either completely or to a significant extent by the public sector have risen by 15.8
percent in Austria over the last six years, including more than 3 percent in 2013. In Germany, by
contrast, the increase in administered prices over the same period was just 7 percent, not even
half as high. The harmonised index of consumer prices at constant tax rates has risen by 15.2
percent in Austria since 2007, which is thus lower than the overall index (15.8 percent) and
shows that part of the inflation is caused by tax hikes. The increase in administered prices, such
as various duties and fees, as well as tax hikes have generated upwards pressure on prices in
the last six years. Structural features in Austria, such as demographic trends as well as lower
competition in some sectors, have spread this pressure across all economic sectors. The
comparatively high inflation in Austria is therefore not imported, but a homemade issue.
Bank Austria Economics & Market Analysis Austria
Page 3
January 2014
Analyses
Inflation risk in Austria?
INCREASE OF ADMINISTERED PRICES IN AUSRIA TWICE AS HIGH AS IN GERMANY SINCE 2007
2007=100
Austria
Germany
116
114
112
110
108
106
104
102
100
2007
2008
2009
2010
2011
2012
2013
Source: Eurostat, Bank Austria Economics & Market Analysis Austria
Prices of food, living and fuel were not inflation-drivers in 2013
Taking a look at the price trends of individual product categories shows that in comparison to
Germany it is not the much-discussed prices of foods, nor overall living costs or fuel costs that
are responsible for the higher inflation. While food prices rose by 3.8 percent in Austria in 2013,
they jumped by 4.2 percent in Germany. Living became tangibly more expensive in Austria in
2013. Prices for living, water and household energy rose at an above-average rate of 2.7
percent, but in Germany this growth still amounted to 2.5 percent. In this context, the strong
increase in rentals in Austria was offset by the below-average price pressure caused by
household energy. In terms of fuel prices, the falling global market prices in 2013 even had a
restraining impact on inflation, resulting in a decline of 3.7 percent yoy in Austria, beating the
figure for Germany (-3.5 percent).
Bank Austria Economics & Market Analysis Austria
Page 4
January 2014
Analyses
Inflation risk in Austria?
HIGHER INFLATION THAN IN GERMANY ON A BROAD BASE
Inflationdifferential to Germany in percentags points
Inflationdifferential to Germany in percentage points
(with components according to the basket of goods)
1.0
health
(with components according to the basket of goods)
hotels and restaurants
6
furnishing and household equipm.
hotels and restaurants
miscellaneous goods and services
5
0.8
2.04
communication
0.37
0.6
Total: 0,5
0.4
increasing
increasing
0.11
clothing and footwear
0.10
0.2
0.04
0.03
0.03
2
0.66
1
0.62
recreation and culture
-0.2
-1
transport
-0.01
-0.06
decreasing
0
food and beverages
-0.20
housing, water and electricity
average 2013
01/02/2014
health
0.81
education
0.0
-0.4
furnishing and household equipm.
0.85
3
miscellaneous goods and services
clothing and footwear
Total: 4,2
4
alcoholic beverages and tobacco
communication
food and beverages
alcoholic beverages and tobacco
0.32
0.27
0.09
0.03
-0.55
transport
-1.03
housing, water and electricity
education
recreation and culture
-2
decreasing
total difference
Mar-14
from 2007
to end-2013
total difference
Source: Eurostat, Bank Austria Economics & Market Analysis Austria
Price growth in Austria roughly one-third higher than in Germany since 2007
Prices in Austria rose by a total of 15.8 percent from 2007 to 2013. In Germany this increase
over the same period totalled just 11.6 percent. Price growth in Austria was thus roughly onethird higher than in Germany. The difference of 4.2 percentage points over six years can be
attributed to faster price growth on a broad scale. A significant part of this inflation increase is
due to the robust growth in the goods categories of Hotels and Restaurants (accounting for 4.2
percentage points of inflation differential: 48 percent), Clothing and Shoes (19 percent),
Household Goods and Household Maintenance (roughly 16 percent) as well as Health-Care (15
percent).
STEADILY HIGHER INFLATION THAN IN GERMANY SINCE 2007
Inflationdifferntial to Germany in percentage points
food and beverages
(with components according to the basket of goods)
2.00
1.75
1.50
1.25
1.00
0.75
0.50
0.25
0.00
-0.25
-0.50
-0.75
-1.00
-1.25
-1.50
2007
alcoholic beverages and tobacco
clothing and footwear
housing, water and electricity
furnishing and houshold equipm.
health
transport
communication
recreation and culture
education
restaurants and hotels
miscellaneous goods and services
2008
2009
2010
2011
2012
2013
Total difference
Source: Eurostat, Bank Austria Economics & Market Analysis Austria
Bank Austria Economics & Market Analysis Austria
Page 5
January 2014
Analyses
Inflation risk in Austria?
Austrian inflation to remain noticeably higher than in Germany in 2014
Although Austria is still expecting low inflation in the coming months, an average figure below
the 2-percent mark is still possible for 2014. We assume that inflation in Austria will be
noticeably higher than in Germany in 2014. The recently announced increase in taxes and
duties that will take effect from March could boost the inflation increase even further, which is
currently estimated at 0.3 percentage points. These measures will push price inflation up in
2014 by roughly another quarter of a percentage point.
Inflation being higher than in Germany for several years could prove to be a boomerang for
competitiveness in the Austrian economy in the long run. Nominal unit labour costs have risen
by approximately 16 percent in Austria since 2007, while growth of only 13.8 percent was
calculated for Germany. The consistently stronger increase in prices compared to Germany
harbours the risk that Austria could lose competitiveness because of the higher inflationary
pressure on producer prices and wage growth, and therefore also lose ground as a key supplier
for the German economy.
FASTER INCREASE OF UNIT LABOUR COSTS IN AUSTRIA THAN IN GERMANY FOR YEARS
2007=100
Austria
Germany
120
115
110
105
100
2007
2008
2009
2010
2011
2012
2013
Source: Eurostat, Bank Austria Economics & Market Analysis Austria
Bank Austria Economics & Market Analysis Austria
Page 6
January 2014
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