Czech annual inflation eases to 1.3% in August, touch below forecast.

By bne IntelliNews September 9, 2013

Czech annual inflation eased to 1.3% in August 2013 from 1.4% the month before mainly due to falling transport prices and cooling food prices, data from the statistics office showed. The reading was below the forecast made by analysts polled by CTK news agency, who forecast inflation to stay unchanged at 1.4%.

In monthly terms, consumer prices in the country fell 0.2% in August, registering the same decrease as in July. The monthly drop was mainly due to a 13.9% fall in vegetable prices with potatoes sliding by 24.2%.

Food and non-alcoholic beverage prices dropped 1.1% on the month in August reducing the annual growth to 5.6%. Transport prices swung to a 0.5% y/y fall in August from a 0.6% y/y hike in July. Post and telecommunication charges continued to decline falling by 10.9% y/y in August.

The August annual inflation was below the central bank’s forecast of 1.6% and remained below its annual target of 2%. The central bank cut its main two-week repo rate to 0.05% in November and said it will keep the rate at the current record low level until inflation pressures increase significantly.

In its latest inflation report, published on August 9, the central bank said annual headline inflation will stay slightly below its 2% target by the end of 2013 before falling more markedly below the target at the start of 2014 when the first-round effects of changes to indirect taxes will drop out.

The August reading bolsters arguments of some of central bank board members to start koruna sales to further relax the monetary conditions. But recent economic data that showed the economy exiting a record-long recession in Q2 with the GDP expanding by 0.6% on the quarter, as well as rebounding industrial output and retail sales are arguments for the central bankers who want the bank to hold off on currency interventions.

With rates now close to zero the central bank has repeatedly reiterated plans to weaken the koruna but rate setters are divided on the timing of such sales that will be the first in more than a decade.

  Aug 2013 y/y change July 2013 y/y change Aug 2013 m/m change
Total 1.3 1.4 -0.2
Food and non-alcoholic beverages 5.6 5.7 -1.1
Alcoholic beverages, tobacco 3.5 3.2 0.3
Clothing and footwear 0.0 0.0 -0.9
Housing, water, energy, fuel 1.3 1.2 0.0
Furnishings, households equipment and maintenance -0.6 -0.6 -0.1
Health 1.8 2.1 -0.1
Transport -0.5 0.6 0.1
Post and telecommunication -10.9 -11.9 0.5
Recreation and culture 0.4 0.2 0.3
Education 1.4 1.4 0.0
Restaurants and hotels 2.1 2.1 0.0
Miscellaneous goods and services 1.6 1.7 0.1
Source: Stats office      

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