Inflation Accelerating Despite Slower Pace of Activity

Export sluggishness continued during autumn leading to a decline in industrial output. However, lively domestic demand for consumer goods and residential construction have not abated. Households are cushioning the slower advance of employment and incomes by a lower propensity to save. The effective rise in the schilling exchange rate keeps import values low. Still, the small surplus on current account has not grown due to lower earnings from merchandise and tourism exports. Domestic inflation has accelerated to an annual rate of 4¼ percent in December.