Producer prices in Bulgaria dipped for a seventh month in a row compared to the year-ago period, falling by a precipitous 10.6 per cent in July 2009, the National Statistics Office (NSI) said.

This compares with a rate of just 7.3 per cent in June and even lower speeds for the previous months. On the month, producer prices slipped by one per cent versus a 0.5 per cent rise month-on-month in June.

While deflation could spell softening demand and deepening recession, economists approached for comment by Dnevnik said what is being seen is not a deflationary spiral. They pinned the price fall on the lower cost of oil, metals and other raw materials.

In July, Bulgaria’s producer prices posted their first monthly drop in three months and record-rising prices in July 2008 drove deflation lower. A year ago, prices marked a 13.6 per cent increase over June 2007 as the economy rode one its bumper quarters in recent years.

The index gauging producer prices on the domestic market again pulled off a smaller fall than the total index, shedding 0.9 per cent on the month and nine per cent on the year.

As calculated by the total index, exporter prices in the mining and quarrying industry slid by 19.2 per cent compared with the corresponding month of 2008, by 12.2 per cent in the processing industry and by 3.2 per cent in power, heating and gas production and distribution.

Meanwhile, Bulgaria’s business sentiment plunged to a new nine-year bottom in August, when it dropped by 1.3 per cent to nine per cent, its lowest since 2000, according to NSI figures.

The estimates tie up with projections by the Finance Ministry that Bulgaria will feel the worse of the crisis in the final months of 2009 and the start of 2010. But if positive signals streaming out of the EU at the moment keep up, Bulgarian companies will be able to lift their spirits next year.

The industrial sector - which was hit hardest by the economic tumult that battered EU demand and crippled exports - put on rosier glasses, expecting operations to be flat in the three months ahead compared with a reduction predicted in July. The sector-specific indicator eked out an uptick of 0.3 percentage points but the NSI said that order intakes will continue to droop and capacities to hum low.

But entrepreneurs’ spirits were dampened by a downbeat construction industry, where prices are expected to go further down in the next few months.

Most retail traders expect the status quo will hold on for the coming months but a further deterioration is unlikely.

As customers snapped up their purses, sales plunged in the past three months and more respondents pointed to mounting insecurity as an acute problem.

The services sector echoes the opinion that matters should stay as they are by the end of the year and not worsen, but demand is stale and more redundancies cannot be ruled out, according to company executives.

Source: Dnevnik.bg