Czech producer prices jump, industry output slows

                                
 PRAGUE, Feb 14 (Reuters) - Czech producer price inflation
jumped to almost 13-years highs in January and industrial output
slowed at the end of 2007, data showed on Thursday, sending two
warning signals on the health of the central European economy.
                                
 The Czech Statistical Bureau (CSU) said industrial producer
prices jumped 1.9 percent month-on-month in January. The market
had expected a 1.2 percent rise.
                                
 A separate set of data showed industrial output growth
slowed to 2.9 percent in December, a much weaker result than the
6.0 percent expansion predicted by analysts in a Reuters poll.
                                
 The crown currency, however, extended its march to all-time
highs, scaling a new record of 25.378 to the euro <EURCZK=> as
the figures raised chances the central bank may raise interest
rate once more this year. It had closed at 25.485 on Wednesday.
                                
 "The PPI is just illustrating the strongly inflationary
environment in the Czech economy," said Pavel Mertlik, chief
economist at Raiffeisenbank in Prague. "The risk of inflation
expectations growth is high. In our opinion the central bank
will not raise rates, but it will not cut them any time soon."
                                
 The central bank (CNB) raised its main interest rate by 25
basis points last week to 3.75 percent, but its forecasts showed
that it expected lower rates by the end of the year.
CNB rates are 25 basis points below the euro zone equivalent
and way below Czech consumer inflation. This soared to a 9-year
high of 7.5 percent in January, largely due to one-off impacts
of tax changes which the central bank ignores.
                                
 The CSU said the January producer prices were driven mainly
by electricity, gas and water costs. Power prices have been
climbing around the region, with growing supply shortages in
eastern Europe.
                                
 In industry, the automotive and other vehicles sector led
the overall activity, followed by electrical equipment and
coking. Output dropped in the food, chemicals, drugs and metals
sectors.
                                
 "The global economy apparently relaxed its pace, which
influenced, for example, metals production," said Pavel Sobisek,
chief economist at UniCredit Bank.
 (Reporting by Jan Lopatka; editing by David Stamp)