**Rising Fuel and Air Fares Push Cyprus Inflation to 3.5 Percent**
Cyprus experienced a notable increase in inflation, which accelerated to 3.5 percent in August 2023, primarily driven by rising fuel prices and air fares that significantly impacted transport costs. This information was released on Thursday by the Cyprus Statistical Service (Cystat), highlighting the ongoing economic pressures faced by consumers in the region.
The Consumer Price Index (CPI) for August rose by 0.93 points, reaching a total of 103.25 units, up from 102.32 in July. This monthly increase of 0.91 percent marks a reversal from the decline observed in the previous month, when inflation had dipped due to lower fuel and clothing prices. Year-on-year, inflation climbed from 2.9 percent in July, indicating a shift in consumer price trends.
In the first eight months of 2023, consumer prices were 2.08 percent higher compared to the same period in 2022. The most significant contributor to the August increase was the transport sector, which saw prices rise by 11.36 percent year-on-year and 5.13 percent compared to July. Within this sector, fuels and lubricants alone accounted for an increase of 0.51 points in the monthly CPI change, while air passenger transport added an additional 0.29 points.
The data further revealed that petroleum products recorded the largest increase among the main economic categories, with prices soaring by 20.31 percent compared to August 2022 and rising by 6.88 percent within just one month. Agricultural goods also saw price hikes, increasing by 5.24 percent annually and by 1.44 percent from July.
Electricity and water prices reflected a 6.01 percent increase compared to the previous year, although they fell by 1.2 percent in August. Services overall recorded an annual increase of 4.06 percent and a monthly rise of 0.86 percent. In contrast, industrial goods, excluding petroleum products, saw a decrease of 0.41 percent year-on-year, with a further decline of 0.1 percent from July.
Among household spending categories, housing, water, electricity, natural gas, and other fuels experienced the second-largest annual increase, with prices rising by 6.86 percent. However, this category saw a slight decline of 0.13 percent from July, largely due to lower electricity prices providing some relief to consumers.
Food and non-alcoholic beverages were 3.81 percent more expensive than a year earlier, with a 0.7 percent increase during August. Other notable increases included prices in restaurants and accommodation services, which rose by 3.42 percent annually, and recreation, sports, and culture, which increased by 3.23 percent. Educational services also saw a rise of 3.52 percent compared to August 2022, remaining unchanged from the previous month.
On the other hand, several categories continued to experience lower prices. Clothing and footwear recorded the largest annual decline, falling by 6.29 percent, with an additional drop of 1.52 percent between July and August. Information and communication costs were down by 2.72 percent year-on-year, although they increased by 0.45 percent in the month. Prices for furnishings, home decoration, household equipment, and routine home maintenance also declined, with annual decreases of 0.84 percent and a monthly drop of 0.11 percent.
The upward contributions to the annual change in prices primarily came from recreation services, catering services, and rents, while lower costs for mobile communication services, insurance, and medicines partially offset these increases. For the monthly change, fuel and air fares exerted the most significant upward pressure, with vegetables also contributing positively. Conversely, clothing had the most substantial downward effect on the index, reducing it by 0.10 points, followed by electricity, which lowered it by 0.05 points.
Cystat's figures indicate that the acceleration in inflation from July was largely driven by renewed increases in fuel and travel costs rather than widespread price rises across the entire consumer basket. It is important to note that Cystat's national CPI figure differs from the Harmonised Index of Consumer Prices (HICP) flash estimate published by Eurostat earlier this week, which estimated Cyprus inflation at 5.2 percent in August, marking it as the second-highest rate in the euro area.
As Cyprus navigates these inflationary pressures, the economic landscape remains a critical focus for policymakers and consumers alike, with the potential for ongoing fluctuations in prices impacting daily life and spending habits across the island.