Persistently High Inflation Dominated by Special Factors

The strong rise in consumer prices continues in Austria. During the last few months the rate of inflation hovered around 3.5 percent and was markedly above the OECD average. In a comparison of inflation rates among industrial countries, Austria is doing very poorly and is now ranked 15th, after having belonged to the top countries with the lowest inflation. Austria's inflation problems are "home-made". Inflationary pressures ease only very slowly despite lower prices of raw materials, more favourable exchange rates and the slack in demand. The high increase in prices of manufacturing products is especially startling. Apparently only part of the reduction in producer and import prices is being passed on to consumers. Furthermore, there are indications that the increase in the value added tax in Germany has also triggered a wave of price increases in Austria.