Lower energy and mining costs continued to push the Czech industrial producer price index down for the sixth straight month in June 2014, data from the statistics office showed. Prices ticked lower by 0.2% y/y in June, slightly deeper than May’s 0.1% y/y decline. The reading defied market expectations as analysts were forecasting prices to remain flat.

Manufacturing producer charges, which have the strongest weight in the index, increased by 1.9% y/y for the second straight month in Junes supported by a growth in all sub-indices except for food products, beverages and tobacco prices that stayed flat y/y.

Prices of electricity, gas, steam and air conditioning declined by 8.7% y/y in June, following an 8.6% drop in May, while water supply charges grew by 3.4% for the sixth straight month. Mining and quarrying prices continued to fall deepening their annual decline to 4.8% in June from 4.6% the month before.

In monthly terms, industrial producer prices in the country stayed unchanged from May when they also stagnated m/m.

Agricultural producer prices fell for the 11^th consecutive month in June and at the much deeper rate of 2.8% compared to a 0.7% y/y drop in the previous month. The decline came as crop prices shrank by 11.6%, while the growth in animal products prices slightly weakened to 8.6% from 8.7% in the previous month. On a monthly basis, agricultural prices dropped by 1.4% from May when they edged up by 0.2%.

Construction work prices stagnated on the month and were by 0.5% higher on the year in June. Prices of market services edged down by 0.4% from May but grew 1% on an annual basis.

The PPI inflation in the Czech Republic eased to 0.8% in 2013 from 2.1% in 2012. Data in the first months of the year indicates that the consumer price inflation, which stayed flat on the year in June, will remain muted in the following months. The Czech central bank has said that the threat of deflation has been averted thanks to the easing of the monetary conditions via the forex interventions. Inflation should return to the bank’s 2% target at the end of the year.