Czech producer prices post deeper than expected decline in October

By bne IntelliNews November 18, 2014

Czech industrial producer prices declined for the second straight month in October, going down by 0.3% y/y, the same as in September, data from the statistics office showed on November 18. The decline came as rising manufacturing charges were offset by declining mining and energy costs. The reading exceeded market expectations as analysts polled by Dow Jones Newswires forecast a 0.2% drop.

Manufacturing producer charges, which have the strongest weight in the index, increased by 1.5% y/y in October, keeping its annual expansion from the previous month. The growth was supported by rising prices in all sub-indices except for food products, beverages and tobacco prices that ticked lower by 1.4% y/y.

Prices of electricity, gas, steam and air conditioning declined by 8.9% y/y in October, slightly deeper than September’s drop of 8.6%. Water supply charges grew by 3.4% for the tenth month running. Mining and quarrying prices continued to fall with their annual decline edging down to 2.1% from 1.9% in September.

In monthly terms, industrial producer prices in the country fell by 0.4% in October, following a 0.3% decline in September.

Agricultural producer prices fell for the 15th consecutive month in October and at a deeper rate of 3.9% y/y than September’s 2.7% y/y drop. The decline came as crop prices shrank by 6.6%, while the growth in animal products prices weakened to just 0.2% from 3.4% a month earlier. On a monthly basis, agricultural prices dropped by 3.1% from September when they went down by 3.4%.

Construction work prices picked up 0.1% on the month and were by 0.8% higher on the year in October. Prices of market services went up 0.2% from September and grew 0.8% on an annual basis.

The PPI data so far in 2014 bolsters the central bank’s strategy to keep the koruna weak amid rising deflation worries. The indicator suggests that consumer price inflation, which stayed at 0.7% y/y for the second straight month in October, will be low in the following months. The Czech central bank expects inflation to return to its 2% target in early 2016.

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