Slovakia's producer prices rise by 2.7%: Coke and petroleum products become 17.5% more expensive

Slovak industrial firms charged 2.7% more in July than a year earlier. The Slovak Statistical Office (ŠÚ SR) reported this on August 27 regarding domestic sales. Of 16 industrial sectors, 15 raised their prices.

The sharpest increase was seen in the coke and petroleum products sector, up 17.5%. Electrical equipment cost 8.4% more, and metals 3.5% more. The energy sector carries the greatest weight in the index. Prices in this sector rose by 3.6%. Only food manufacturers lowered their prices, by 2.8%. They have remained the only sector with falling prices since January.

Exporters have less room to pass on costs

Over the past seven months, domestic producer prices were 1.3% higher than a year ago. Compared to June, they rose by 1.8%. Export prices rose by 2.4% year-over-year in July but fell by 0.5% compared to June. Over the seven-month period, they are 2.1% higher.

This difference reflects the market situation. Domestically, companies are passing on their energy costs. Abroad, they face customers who are pushing prices down. Slovak industry primarily supplies intermediate goods and vehicles. Its profit margin depends on this difference.

Growth Remains Below 1%

The wave of rising costs is hitting a sluggish economy. On August 14, the ŠÚ SR reported year-over-year growth of 0.7% for the second quarter. That was the weakest figure in four quarters. Growth compared to the first quarter stood at 0.2%.

Mária Valachyová, chief economist at Slovenská sporiteľňa, commented on the figures on August 14: “The Slovak economy thus lagged behind the European Union average, where growth accelerated to 0.5% quarter-over-quarter in the second quarter.” She expects growth of 1% for the full year and sees downside risks.

Marek Gábriš, chief economist at ČSOB, highlighted the regional comparison on the same day. The Czech Republic grew nearly three times as fast as Slovakia in the second quarter, while Poland grew nearly five times as fast. Analysts at the National Bank of Slovakia (NBS), Michal Doliak and Viera Mráziková, attribute this to the industrial sector, which is stagnating amid an uncertain environment and weaker competitiveness.

German buyers are feeling the impact first in metal parts, electrical engineering, and plastic components. Germany is Slovakia’s largest trading partner. Anyone renewing contracts there would be wise to review the energy clauses and lock in prices for the fourth quarter now. Investors expect a tight situation: costs are rising, demand remains weak, and margins are shrinking. Those who manufacture in Slovakia are negotiating electricity and gas contracts before winter.

Sources: Štatistický úrad SR (SK), Národná banka Slovenska (SK), Slovenská sporiteľňa (SK), ČSOB (SK), TASR (SK)

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