Lower energy and mining costs continued to push the Czech industrial producer price index down for the fifth straight month in May 2014, data from the statistics office showed. Prices ticked lower by 0.1% y/y in May, slightly softening from a 0.3% decline registered in April. The reading defied market expectations as analysts were forecasting a 0.1% gain.

Manufacturing producer charges, which have the strongest weight in the index, increased by 1.9% y/y in May, speeding up from 1.6% the month before due to a faster growth in food prices and rising coke and refined petroleum products as well as metals prices.

Prices of electricity, gas, steam and air conditioning declined by 8.6% y/y in May, the same as in April, while water supply charges grew by 3.4% for the fifth straight month. Mining and quarrying continued to fall deepening their annual decline to 4.6% in May from 4.1% the month before.

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

Agricultural producer prices fell for the tenth consecutive month in May but at the much softer rate of 0.7% compared to a 2.8% y/y drop in the previous month. The decline came as crop prices shrank by 7.7%, while the growth in animal products prices quickened to 8.7% from 7.8% in April. On a monthly basis, agricultural prices edged up by 0.2% from April when they were down by 0.1%.

Construction work prices stagnated on the month and were by 0.5% higher on the year in May. Prices of market services also stayed unchanged from April but grew by 0.4% on an annual basis, registering the first increase in 15 months.

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 edged up to 0.4% y/y in May from a five-year low of 0.1% in April, 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.