Industrial producer prices in Serbia rose by 13.9% year-over-year in February compared to 14.5% y/y in the previous month, the statistical office reported. The strongest increase was recorded in the mining and quarry industry reaching 21.3% y/y. At the same time the rises in the manufacturing and utilities were 13.6% y/y and 12.5% y/y, respectively. Within the manufacturing sector the production of crude oil derivatives continues to be the major driver for the upward trend, as producer prices surged by 52.8% y/y reflecting the unfavorable situation on international markets.

Prices in the production of electrical and optical equipment were higher by 21.5% y/y, while the ones in the manufacturing of base metals went up by 19.7% y/y. The monthly PPI inflation was 0.9% (1.9% m/m in February 2005) fuelled by the 1.3% m/m increase of industrial producer prices in manufacturing (2.2% m/m in the same month of 2005), which in turn was driven mostly by the 7.6% m/m rise in production of crude oil derivatives and 4.1% m/m growth of prices in the chemical sector. The rise recorded in the mining and quarrying industry was 0.4% m/m, while utilities added 0.1% m/m. In the first two months of the year PPI rose by 14.2% y/y, while the cumulative inflation stood at 1.8%. Considering the fact that there was reduction of price of fuel at the start of March, we expect that the PPI inflation may slightly ease in the month. However, the planned increase of electricity prices as of April 1 (according to local media it will be approximately 10% although there is still not confirmation for its magnitude by the relevant authorities) will result in strong acceleration in the growth of industrial producer prices already next month.