PRAGUE, Aug 8 (Reuters) - Czech consumer prices ticked up as
expected in July, but the outlook for an inflation drop coupled
with weak industrial production pointed to a slowdown in growth
and a possible further reduction in borrowing costs.
Consumer inflation <CZCPIY=ECI> grew 0.5 percent
month-on-month in June, the Czech Statistical Bureau said on
Friday, while the market had expected a 0.6 percent rise,
according to a Reuters poll <CZ/ECON04> <CZ/ECON15>.
The rise, which put the year-on-year figure at 6.9 percent,
up from 6.7 percent in June, came on the heels of a surprise
interest rate cut on Thursday.
Separate data showed industrial output rose by 2.2 percent
year-on-year in June, lagging forecasts of 5.4 percent.
Unemployment picked up to 5.3 percent in July from 5.0
percent in June.
"All the data released today point to slowdown of the
economy," said David Marek, an analyst at Patria Finance.
"The (inflation) data gives room for a further interest rate
reduction," he said, adding that the industrial output dip
curbed inflation pressures.
The Czech central bank (CNB) unexpectedly cut interest rates
by 25 basis points on Thursday, following warnings it could ease
due to the strong crown currency, which is threatening to drive
down inflation and also growth.
Central bank Governor Zdenek Tuma said he could not exclude
another cut this year.
The central bank expects growth to slip to 4.1 percent this
year and 3.6 percent in 2009 from 6.6 percent last year.
But some analysts said the bank should not hurry with
another rate cut for now.
"The current commodity price development gives hope that
inflation will slow down more significantly from October," said
Michal Brozka, an analyst at Raiffeisenbank.
"However, the high inflation level and weakening crown show
that the central bank would not have to hurry with lowering
interest rates."
The bank reiterated it expects prices to fall next year
although its latest forecasts indicated a slight rise in the
inflation outlook to 2.5 percent at the end of 2009.
It had earlier seen it falling to 2.2 percent in the third
quarter.
The bank's inflation target is set at 3 percent plus/minus
one percentage point, easing to 2 percent from 2010.
The crown weakened after the data, falling to 24.325 to the
euro <EURCZK=> from 24.260 ahead of the news.
The unit has jumped 13.7 percent against the euro in the
past year, which was a major factor in the central bank's
decision to leave borrowing rates flat between February and
August, even as regional neighbours tightened their policy to
combat higher prices.
For a CPI INSTANT VIEW.............[]
For a CPI TABLE....................[]
For an UNEMPLOYMENT TABLE .........[]
For an INDUSTRIAL OUTPUT TABLE.....[]
(Reporting by Jana Mlcochova; Editing by Victoria Main)
