Inflation in Montenegro continues to rise, while the real value of wages has continued to fall for four months in a row, according to data from the Statistical Office Monstat on consumer price and wage trends.
The annual inflation rate in May was 4,5 percent, the highest in the past 12 months. This rate was 3,8 percent in April, and 3,2 percent in March and February.
Inflation in this percentage was due to a 4,6 percent increase in meat prices, 11,9 percent in restaurant and cafe services, 20 percent in rent, 15 percent in pharmaceutical products, 19,1 percent in fruit, 14,9 percent in oils and fats, 24,1 percent in water supply, and 15,6 percent in home maintenance and repair services.
Prices of tobacco products increased by 6,1 percent due to the increase in excise duties, hotel accommodation services by 7,2 percent due to the increase in the VAT rate. Prices of vehicle maintenance and repairs also increased by ten percent, coffee, tea and cocoa by 20 percent, and newspapers and publications by 33,9 percent.
When looking at the structure of products and services, which have the highest inflation rate, it can be concluded that this increase in inflation was not imported, but was influenced by the increase in the price of domestic products and services, such as services in cafes, restaurants, the price of rent, water, hotel accommodation, craft repair services in apartments and motor vehicles...
Monstat assigns a certain weight in per mille to each product and service, which is its share in the assumed consumption of an average household. This weight is multiplied by the percentage increase in the prices of that product or service to obtain its share in the inflation rate. The shares of products and services that are part of the consumer basket are then added together (whether positive or negative) to obtain the final inflation percentage.
For example, the Monstat table shows that meat has a weight of 88,4 per thousand, which is 8,84 percent - that is, Monstat believes that the average family spends 8,84 percent of its income on meat. The increase in meat prices in May compared to the same month last year was 4,6 percent. So, by multiplying 0,0884 by 4,6 percent, we get a figure of 0,4 percent, which is the most important part of the 4,5 percent price increase.
After meat, the most significant share in inflation was the increase in prices in cafes and restaurants of 11,9 percent, because Monstat believes that the average household spends 3,52 percent of its income on these services per month, thus gaining a share in inflation of 0,39 percent.
Although not all households rent and do not pay rent, Monstat had to divide the cost by the average household in order to calculate the increase in these prices and their share in inflation. For example, if ten percent of households rent and spend 20 percent of their income on rent, then this amounts to a cost of two percent of the average household's income.
Monstat calculated that rent prices increased by 20 percent compared to May last year, which is due to the increase in real estate prices and the immigration of a large number of foreigners who obtain temporary or permanent residence. Multiplying with the weight, it was found that the increase in rent prices affects the percentage of inflation growth with a share of 0,39. For those who are actually tenants, this cost and inflation have a real and much greater impact on them and their personal inflation is much higher than average.
Medicines and other pharmaceutical products have increased in price by 15 percent in the year. According to the Monstat formula, the average household spends 2,19 percent of its income on these medicines, so its share in the inflation rate is 0,32. For those who have health problems and spend more money on medicines, their price increase had an even greater impact, so their subjective feeling of inflation is much higher.
Water supply from city waterworks has increased in price by an average of 24,1 percent, as in some municipalities there was an increase of 50 to 100 percent, and in some there was no change in price. Monstat believes that the average household spends 0,82 percent of its income on water, so despite the high price increase of this product, their impact on the inflation rate is 0,2.
Fruit prices rose by 19,1 percent, but since the average household spends 1,41 percent of its income on this food, the impact on the inflation rate is 0,28. The price of oils and fats increased by 14,9 percent and they account for 1,51 percent of total household expenses, so their share in this inflation is 0,22.
Products from the coffee, cocoa and tea group have increased in price by 20 percent, but since Monstat believes that the average family spends 0,77 percent of income on them, their share in inflation is 0,14.
In May, compared to the same month last year, fuel prices fell by 9,9 percent, and since it accounts for 5,57 percent of household consumption, this contributed to a decrease in the inflation rate by 0,6. In other words, if the price of fuel had remained the same, the annual inflation rate would not have been 4,5 but 5,1 percent.
Footwear prices decreased by 4,7 percent. The average household spends 2,82 percent of its income on them, so they contributed to a 0,14 percent decrease in the inflation rate.
The decrease in the price of solid fuels, telephone equipment, airline tickets and vegetables had a slight impact on the decline in the inflation rate.
The real value of average earnings has been falling for four months in a row
According to Monstat data, in every month from January to April, Montenegro has a real decline in average earnings.
The average net salary in January was 1.004 euros, down eight euros or 0,8 percent from December last year. As the monthly inflation rate in January was 1,2 percent, the real value of January's salary decreased by two percent.
The average net salary in February was 1.002 euros, down 0,2 percent from January. Inflation in February was 0,4 percent, so the real value of earnings decreased by 0,6 percent.
In March, the average net salary increased by one euro or 0,1 percent, but as monthly inflation was 0,3 percent, the real value of salary decreased by 0,2 percent.
In April, the average salary increased by six euros to 1.009 euros, or 0,6 percent, but as inflation was 0,8 percent, the real value decreased by 0,2 percent.
Inflation is expected to continue due to the increase in the price of baked goods and fuel.
In June, a continued increase in inflation can be expected, as prices have already risen in two product groups that are significantly represented in Monstat's benchmarks.
Since last week, the price of basic bread and pastries has increased by seven to 10 percent. Since this cereal product, according to Monstat, accounts for six percent of household consumption, the expected impact on the inflation rate is 0,4 to 0,5.
Oil prices on international stock exchanges have increased by almost ten percent in the past five days, due to the escalation of the war between Israel and Iran. However, since data from the oil derivatives exchange from Friday, June 13, are used to calculate fuel prices in Montenegro, this led to a price increase of one and two cents per liter on Monday. Prices on the oil derivatives exchange lag behind the crude oil exchange, and the entire period of growth has not been included in the calculation period for prices in Montenegro.
It is realistic to expect that in the new calculation on June 30th, there will be a significant increase in fuel prices, whose weight for calculating inflation is 5,57 percent.
Also, in June, prices in the catering, hotel and retail sectors traditionally increase further ahead of the season, which will, as expected, affect inflation.
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