Czechia Witnessed Decrease in Consumer Price Inflation in June

The Czech Republic witnessed a decrease in consumer price inflation in June, marking a significant milestone as inflation fell below 10% for the first time since January 2022.

According to analysts from ČTK, this decline can be attributed to a comparison with last year’s figures and the influence of a strong koruna, along with reduced demand. In May, inflation was recorded at 11.1%. The Czech Statistical Office (CZSO) is scheduled to release the inflation data for June later this week.

Experts from Raiffeisenbank estimate that the annual inflation rate for June will be approximately 9.7%. They point out that falling fuel prices have played a significant role in the disinflationary process, as they have dropped by more than 20% compared to the previous year.

This decline is primarily due to the high base effect from last year, when fuel prices reached record highs during the summer.

The analysts also anticipate a decrease in regulated prices, influenced by lower electricity and gas prices in the market, as well as government regulations. However, food prices continue to contribute to sustained high inflation.

Vít Hradil, Chief Economist at Cyrrus, suggests a possible slight increase in the food sector compared to May, and with the arrival of the tourist season, prices for recreational activities are also likely to rise. Hradil expects ongoing price increases in food, accommodation services, clothing, and footwear.

On the other hand, housing prices are expected to stabilize, possibly experiencing a minor decline. Fuel and household equipment prices are projected to have a neutral impact on inflation compared to May. Hradil estimates that the price level has increased by 0.4% compared to May, indicating an annual inflation rate of 9.8%.

Analysts from Česká spořitelna also predict an annual inflation rate of 9.8% for June. They emphasize various factors that contribute to curbing inflation, including subdued household consumption, declining energy, fuel, and real estate prices, as well as the influence of a strong koruna, which weakens inflation.

While food price inflation is moderating, there is still uncertainty regarding its future trajectory.

Looking ahead, Česká spořitelna analysts anticipate further deceleration of inflation in the upcoming months, with a projected decline to 8.6% in July and 8.2% in August.

They expect the rate of price growth to reach 3% at the beginning of next year.