Sep 13, 2023

Czech Inflation Slows to 8.5% in August

Consumer prices increased by 8.5% year-on-year and by 0.2% month-on-month in August, the Czech Statistical Office (CZSO) reported.

Czechia’s inflation remained the 9th highest in Europe, and local analysts expect the easing of inflation to continue only at a slower pace, prompting the Czech National Bank to take no action in its dovish interest rates policy at its upcoming September board meeting.

August y-o-y inflation is 0.3 percentage points down on July, when inflation eased to 8.8% from 9.7% in June. CZSO highlighted that the m-o-m development came mainly due to higher prices in the transport section.

“Fuel prices had the most significant influence on the development of consumer prices in August. They have already grown for three consecutive months,” Pavla Sediva of CZSO commented.

Sediva added that “diesel was sold at petrol stations for around CZK37.40 per litre on average,” which is the highest value since January. Petrol Natural 95 price of CZK39.50 per litre is the highest since November of last year.

In m-o-m terms, fuel prices and lubricants from personal transport equipment grew by 7.7%. Food and non-alcoholic beverages decrease in prices by 6.7% also contributed significantly to the m-o-m development, with potatoes down by 13.3%, eggs by 6.6%, and semi-skimmed milk by 3.3%.

Y-o-y price growth was registered in most sections. In the food and non-alcoholic beverages section, meat prices increased by 2.7% (+3.2% in July), yoghurts by 5.7% (+7.4%), cheese and curd by 2.4% (+5.6%), eggs by 16.9% (+28.2%), and vegetables by 24.5% (28.9%).

The most significant influence on the y-o-y growth came from the section housing, water, electricity, gas and other fuels. There, prices of actual rentals increased by 7.6%, water supply by 16.3%, sewage collection by 26.9%, electricity by 23.1%, natural gas by 34.5%, solid fuels by 22.4% and heat and hot water by 37.3%.

Head analyst at Cyrrus Consulting, Vit Hradil, told Czech Television (CT) that given the August figures, he does not expect the CNB to lower the 7% interest rates, where these have remained since the appointment of the current governor, Ales Michl, last summer.

“Unless there will be a stark surprise, the first lowering can be expected in November,” Hradil was quoted as saying by CT.

Petr Zahradnik, economist at Ceska sporitelna, Erste’s Czech branch, and a member of the government NERV advisory body, expects an easing of inflation pressure on household consumption and a revival of the stagnating economy only in 2024.

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