PRAGUE, March 9 (Reuters) - Czech consumer prices rose by a
lower-than-expected 0.1 percent on the month in February,
putting the annual rate at 1.8 percent and prompting analysts to
say the central bank was under no pressure to raise rates soon.
Annual inflation was below market expectations for a 2
percent rise, while the monthly figure was marked by a fall in
fuel prices, which helped offset rises in some food items.
Parallel data showed average real wages dipped in the fourth
quarter by 1.2 percent when compared to a year earlier,
reinforcing the market's view that inflationary pressures
remained relatively weak.
The statistics office also reported a 15.7 billion crown
($898.7 million) foreign trade surplus in January, bigger than
analyst forecasts.
Exports rose 28.4 percent year-on-year and imports by 30.9
percent. The full-year 2010 trade balance was revised to a
122.82 billion crown surplus, down from previously estimated
124.5 billion surplus, the statistics office said.
The bureau also released for the first time foreign trade
data adjusted for transactions by non-residents, showing a
surplus of 0.57 billion crowns, down from 5.6 billion crowns
last year.
(See details below commentary)
COMMENTARY:
RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MANAGEMENT
"A muted increase in food prices was another surprise and
worth noting is that also core inflation items remain muted. All
in all, the slight increase in annual inflation was driven by
only transport prices and by alcohol and tobacco."
"Czech central bank is now facing mixed factors: on one hand
there is a signal that the ECB will raise its interest rates
next month and globally there is growing inflationary risk
coming from high commodity prices."
"On the other hand, Czech inflation remains below forecast
(and below the target) and there is still lot of uncertainty
about Czech pension reform and related changes in VAT rate, and
about their exact impact on overall inflation, which will go
temporary up because of the VAT changes, and household
consumption, which is likely to be impacted negatively in short
term, once the VAT rate is raised."
"All in all, the Czech National Bank will keep its interest
rates on hold at its March meeting but there will be lot of
mixed factors to consider in second quarter of this year."
"External factors seem to point to growing inflationary
risks and to need to tighten Czech monetary policy earlier than
assumed by the latest forecast of the central bank.
MICHAL BROZKA, ANALYST, RAIFFEISENBANK
"Consumer prices were in line with our expectations, rising
only slightly. A moderate growth in prices of food and alcohol
were partially offset by a drop in prices of clothing and shoes.
Inflation continues to be subdued."
"The overall data, including a significant drop in wages in
the fourth quarter of last year, are arguments for holding fire
by central bankers."
"But the central bank can be concerned over the negative
influence of an expected rise in the ECB rates on the Czech
crown. But so far the crown has not reacted to this expectation
significantly."
PETR DUFEK, DIRECTOR OF MACRO ANALYSIS, CSOB
"Unlike the euro zone, the Czech Republic does not have a
problem with inflation."
"Price growth is driven by growing costs -- especially food,
however weak demand sufficiently limits retailers' possibility
to raise prices."
"Inflation has developed more favourably than expected since
the start of the year and stays under the central bank target.
It can stay under the target in the following months in spite of
the record oil price and rising fuel prices in the Czech
market."
"The central bank certainly does not have to hurry with
raising interest rates. Like the development of real wages
shows, demand definitely is not rising and inflation therefore
will stay under the influence foreign commodity prices."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"Inflation continues to move below the central bank's
inflation target. The fears of some central banks are not coming
to fruition, at least not for now, so there is no pressure to
immediately raise interest rates."
"The Czech Republic does not necessarily have to follow
Hungary or Poland, where rates have already risen."
"If some inflation pressures emerge, they will be pressures
only from external factors like the development of commodity
prices on international markets."
PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT, PRAGUE
"Inflation will be most watched. It is a bit slower than the
consensus, on the other hand the direction is correct."
"Year-on-year inflation has resumed growth, and apparently
this is not the end of the story. It is only a question of time
when CPI will exceed 2 percent, maybe rather significantly."
"I can see two driving forces: motor fuel prices and tobacco
prices. In both cases, a lot is already in the pipeline but is
not reflected in February."
"The figure means no change in the (central bank) stance.
But the fact there is an oil price spike, the fact the ECB is
going to hike in April, and the fact the Czech government plans
a VAT rise this year -- all these are in favour of a larger rate
hike this year than previously thought or included in the
inflation report."
****************************************************************
KEY POINTS:
CONSUMER INFLATION
(pct change) Feb Jan Feb forecast
month/month 0.1 0.7 0.2
year/year 1.8 1.7 2.0
FOREIGN TRADE
(in bln CZK) Jan Dec Jan fcast
balance 15.69 0.57 (0.99) 13.25
(nominal y/y change in pct)
exports 28.4 n/a (27.0) 24.2
imports 30.99 n/a (28.5) 27.3
CZECH AVG WAGE Q4/10 Q3/10 Q4/09 2010
Monthly wage (nominal) 25,803 23,673 25,565 23,951
real change y/y (pct) -1.2 0.2 4.8 0.5
nominal change y/y +0.9 2.1 5.2 2.0
INFLATION
- The monthly consumer price growth was mainly due to a rise
in food prices, mainly vegetables, sugar and coffee.
- Drug prices rose by 0.6 percent the prices of holiday
packages were up by 2.3 percent, the bureau said.
- Prices of clothing and footwear dropped by 0.9 and 1.0
respectively.
- Fruit prices fell by 1.7 percent, vegetable oil prices
fell by 2.6 percent and the price of yoghurt fell by 1.8
percent.
- Fuel prices fell by 0.1 percent after three consecutive
months of growth, the bureau said.
FOREIGN TRADE
- The trade balance surplus rose to 15.7 billion crowns in
January from revised 0.57 billion in December.
- Exports rose by 28.4 percent. Imports grew by 30.99
percent.
- In euro terms, imports rose by 39.9 percent, exports rose
by 37.2 percent.
- The trade balance was higher by 0.4 billion crowns
compared with a year ago due to a 9.9 billion crown improvement
in the machinery and car trade surplus and 0.7 billion
improvement in the industrial consumer surplus.
- Overall exports of machinery and vehicles rose 30.0
percent.
WAGES
- Real wages in the private sector stagnated year-on-year
and rose by 2.1 percent nominally in the fourth quarter; real
wages in the public sector dipped by 5.9 percent from the
previous quarter.
- Gross average monthly wages in the fourth quarter stood at
25,803 czech crowns ($1,477).
Details of January foreign trade................[]
Details of February inflation ..................[]
Details of Q4 avg wage .........................[]
CENTRAL BANK FORECAST:
The central bank saw in its last quarterly forecast February
annual inflation at 2.1 percent.
BACKGROUND:
- Market expectations before release []
- December foreign trade figures []
- January consumer inflation [] []
[]
- January producer prices figures []
- Report on last Czech c.bank rate decision......[]
[] [] []
LINKS:
- For further details on January foreign trade, February
inflation, Q4 real wage and past data, Reuters 3000 Xtra users
can click on the Czech Statistical Bureau's Website:
http://www.czso.cz/eng/csu.nsf/kalendar/2004-pru
- 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>
(Writing by Jana Mlcochova; editing by Michael Winfrey)
