Czech annual inflation eases to 3.5-year low of 1% in Sept 2013, below forecast.

By bne IntelliNews October 9, 2013

Czech annual inflation eased to 1% in September 2013 from 1.3% the month before as price growth slowed in most of segments of the consumer basket, data from the statistics office showed. The reading, which was the lowest since March 2010, was below the forecast made by analysts polled by CTK news agency, who forecast prices to rise by 1.2%.

In monthly terms, consumer prices in the country fell 0.4% in September, following a 0.2% drop in August. The monthly drop was mainly due to a 13.4% fall in holiday packages as the summer season came to an end.

Housing and utilities charges (28% of the basket) flattened on the month pushing the annual growth of the components down to 1.2% in September from 1.3% in August.

Food and non-alcoholic beverage prices (15% of the basket) dropped 0.8% m/m reducing the annual growth to 4.6% from 5.6%. Transport prices shrank for the second straight month in September falling by 0.1% m/m leading to a deeper annual decline of 1.2% from 0.5%in August. Post and telecommunication charges also declined – by 1.3% m/m and 11.6% y.y.

The September annual inflation was below the central bank’s forecast of 1.4% 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 September reading bolsters arguments of some of central bank board members who want the bank to immediately 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, 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.

  Sept 2013 m/m change Sept 2013 y/y change Aug 2013 y/y change
Total 99,6 101,0 101,3
Food and non-alcoholic beverages 99,2 104,6 105,6
Alcoholic beverages, tobacco 100,3 103,5 103,5
Clothing and footwear 103,0 100,9 100,0
Housing, water, energy, fuel 100,0 101,2 101,3
Furnishings, households equipment and maintenance 99,3 98,8 99,4
Health 100,0 101,4 101,8
Transport 99,9 98,8 99,5
Post and telecommunication 98,7 88,4 89,1
Recreation and culture 96,8 100,5 100,4
Education 101,1 101,4 101,4
Restaurants and hotels 100,2 101,9 102,1
Miscellaneous goods and services 99,7 101,2 101,6
Source: Czech stats office      

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