PRAGUE, Nov 9 (Reuters) - Czech consumer prices dropped by
bigger-than-expected 0.2 percent in October versus a year
earlier, data showed on Monday, the first annual drop in more
than six years.
Data also showed the jobless rate dipped to 8.5 percent of
the workforce in October from 8.6 percent a month earlier.
Consumer prices dipped 0.2 percent in October versus
September. A Reuters poll had forecast prices dropped by 0.1
percent both month-on-month and year-on-year.
The Czech economy shrank by 5.5 percent year-on-year in the
second quarter but rose 0.1 percent from the previous three
months.
The central bank cut interest rates to a record low of 1.25
percent on August 6. In its last quarterly released last week,
it saw October annual inflation at -0.3 percent.
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KEY POINTS:
CONSUMER INFLATION
(pct change) Oct Sept Oct forecast
month/month -0.2 -0.4 -0.1
year/year -0.2 0.0 -0.1
CZECH UNEMPLOYMENT Oct Sept Oct forecast
pct of workforce 8.5 8.6 8.6
Details of October inflation data...............[]
Details of October jobless data.................[]
- The monthly price drop was mainly due to a decline in fuel
prices by 2.6 percent, and natural gass prices by 2.8 percent.
- Package holiday prices fell 2.4 percent.
- The drop in food and non-alcoholic beverages prices continued.
COMMENTARY:
PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT, PRAGUE
"The figure is just between the consensus on the market and
the forecast of the central bank, which was lower. It appears
food drove prices somewhat lower, and it is a very volatile
item... Some inflation in food prices is in the pipeline. So we
will definitely get back to positive figures in year-on-year
comparison in November."
"There will be still one more (CPI data) figure before the
next central bank meeting, so that figure will be more
important."
PETR DUFEK, ANALYST, CSOB
"Inflation is better than expected and has thus gone further
away from the central bank target.
"On the top of that, the crown is firming further and moving
away from the bank's forecast value, so the room for favourable
price development will continue to exist.
Monetary policy inflation, which is interesting for the
central bank, will remain very low and speak in favour of lower
interest rates. We can only speculate if this convinces the
central bank to lower them."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"Inflation is decreasing because of lower prices of natural
gas for households... It was expected that we should touch
deflation briefly. However, in November and December, inflation
should pick up and reach positive numbers again."
"I wouldn't say that it is surprising enough to change the
decision of the national bank to leave interest rates unchanged.
I would expect several months of stable rates."
MARKET REACTION:
Crown flat against the euro at 25.650 <EURCZK=>.
BACKGROUND:
- September foreign trade figures.................[]
- Report on last Czech c.bank rate decision.......[]
[] [] []
- The central bank (CNB) targets headline inflation, which it
seeks to keep at 3 percent year-on-year, allowing for
fluctuations by plus/minus one percentage point from this level.
The target will fall to 2 percent the next year.
- The CNB's quarterly prediction sees consumer price inflation
of 2.4 percent in fourth quarter of 2010 and 2.2 percent in the
first quarter of 2011.
LINKS:
- For further details on October other past inflation data,
Reuters 3000 Xtra users can click on the Czech Statistical
Bureau's website:
http://www.czso.cz/eng/csu.nsf/kalendar/2004-ISC
- For LIVE Czech economic data releases, click on <ECONCZ>
- Instant Views on other Czech data []
- Overview of Czech macroeconomic indicators []
- Key data releases in central Europe []
- For Czech money markets data click on <CZKVIEW>
- Czech money guide <CZK/1>
- Czech benchmark state bond prices <0#CZBMK=>
- Czech forward money market rates <CZKFRA>
(Reporting by Jan Lopatka)
