By: The Quinnipiac University Economics Research Team, Michael Szwaja
This is the third in a series of short analyses looking at Consumer Prices (via the CPI) in Central Europe with this report featuring Poland, Hungary, Czech, Slovakia, and Romania. The CPI provides information on the prices of goods and services purchased by households. An increase in the CPI is an increase in the price of a selection of goods and is equivalent to a decrease in the purchasing power of the local currency. The decrease in purchasing power is also known as inflation. The combined CPI analyzed here is Eurostat’s Harmonized index of consumer prices (HICP) for each CEE countries mentioned before. It’s based on 12 subgroups of consumption expenditure (according to the so-called COICOP-classification), and detailed metadata. The graphs convey monthly CPI data for Czech, Hungary, Poland, Romania, and Slovakia during 2020 (January-October).
Starting from up top, Romania’s CPI hovers around 170 for the entire year, with a slight increase around March before trailing off in September to end the period with an increase of half a percent. Hungary experiences more movement over this time. Hungary’s CPI stays around 162 until it spikes in August and then tapers off to end the term at an index level of 165. Hungary’s CPI increases 1.8% over the period.
The CPI for Czech, Poland, and Slovakia are close to each other for the entire year. The trend for Czech and Poland is inverse in the few first months, with Czech gradually decreasing and Poland seeing a rise until April. This changes from to April to October where Czech’s CPI increases and then tapers off, whereas Poland spikes and then hovers around 136 from June to the remainder of the period. Czech’s CPI Index starts at 135 and ends at 137, conveying a 1.5% increase. Whereas Poland’s CPI increases 2.3%, starting from 133 and ending at 136. Poland and Czech start two percentage points away from each other, and that gap closes to be within 1 percentage point from one another. Slovakia’s CPI Index holds relatively constant for the entire period. It starts at 132 and ends at 133, with a modest increase of just below 1% for its CPI Index.
All the CEE countries did experience a net gain in their CPI over the course of the year, with modest increases for Romania (.5%) and Slovakia (<1%), and more significant increases for Hungary (1.8%), Czech (1.5%), and Poland (2.3%). March-May saw the most activity for any increase in CPI Index across all the countries, but these trends taper off except for Poland. The pandemic, which began around March of this year, lowered the costs of some goods and services but raised others, so its exact impact on prices is unclear. The months of sharply rising prices from the Spring to Summer looks like it coincided with the period of large fiscal stimulus that came as part of a pandemic relief effort. However, it seems that the beneficial effect from economic incentives from the respected country’s fiscal stimulus wears off as the year rolls in the fall. Furthermore, the spikes of coronavirus cases and tightened social distancing guidelines seem to correlate to the diminishing trends for CPI for the CEE countries, though Poland diverges from that narrative as well.