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Inflation steady in June at 2.9 pct

 Inflation in consumer prices was steady at 2.9% year-on-year in June, with recent months generally seeing modest inflationary pressures. While headline inflation was unchanged, core inflation continued to see moderate pressure, rising to 3.0% y/y in June. 

Headline inflation is expected to average around 3.0% for 2014 as a whole despite the limited pressures seen in the foodstuffs component later in the year due to rising international food prices.

The main sources of upward pressure on prices over the last year remained the clothing & footwear and furnishings & household maintenance sectors. Meanwhile foodstuffs and other goods & services have generally helped reduce inflation in consumer prices over the last year. Housing rent has also been providing some downward pressure over the last nine months. 
Food price inflation eased further in June, slowing to 2.5% y/y, on a decline in prices during the month. Food price inflation has been trending lower since the start of the year when it stood at 4.2%. There is a good chance that inflation in food prices will begin to pick up once again later this year, especially as international food prices have been seeing inflation accelerate. Still, any increase is expected to have a modest impact on overall inflation.
Household services, mostly housing rent, have been another source of downward pressure in recent months, with inflation in the sector easing slightly to 4.4% y/y. With the housing component only updated once a quarter, the June increase in prices was the smallest seen in over a year. Inflation in housing rent alone declined to 4.9% y/y in June, from 5.2% in March. This easing trend is unlikely to be sustained through the rest of 2014, with inflation in this sector expected to stabilize.
Clothing & footwear and furnishings & household maintenance have been the main sources of upward pressure on prices over the last year, though both have shown signs of stabilizing in recent months. Prices of clothing & footwear rose by 3.0% y/y in June, down from 3.1% the month before. The furnishings & household maintenance component has also seen growth in prices moderate over the last few months, with inflation at 4.6% in June, down from 5.2% in May.
Two sectors that have been providing some increased upward pressure on inflation over the last year are education and restaurants & hotels, albeit from low rates in 2013. Prices in the education sector have seen inflation rise from around 0% a year ago to 4.2% in June. Similarly, inflation in the restaurant & hotels sector stood at 2.5% in June, up from 0% last year, reflecting healthy consumer spending in that sector.

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