INSTANT VIEW 3-Czech Sept PPI 0.3 pct m/m, analysts saw drop

                                
 PRAGUE, Oct 15 (Reuters) - Czech industrial producer prices
rose by 0.3 percent month-on-month in September for an annual
rise of 2.4 percent, surprising the market looking for a
decline, data showed on Friday.
                                
 Analysts had forecast a 0.1 percent month-on-month decrease
in industrial PPI and a 2.1 percent year-on-year growth.
<CZ/ECON04> <CZ/ECON15> <ECONCZ>
                                
 In August, producer prices grew by 1.8 percent year-on-year.
                                
 Month-on-month, growth in September was driven mainly by
higher grain prices which reflected in a 0.8 percent rise in
prices of foodstuff.
                                
 Prices of chemicals and minerals rose each by 1.2 percent.
                                
 The statistics bureau said agricultural producer prices rose
by 3.5 percent on the month, and showed its second annual growth
in a row, a sharp turnaround from a series of falls in the
previous two years, rising 16.4 percent.
****************************************************************
KEY POINTS:
(change in percent)        Sept       Aug       Sept forecast
 PPI
 month/month               0.3       -0.4       -0.1
 year/year                 2.4        1.8        2.1

(For full table of data........................[ID:nPRA005288])

- In the year on year comparison, producer prices were driven by
a 24.7 percent rise in prices of coke and refinery products, the
statistics office said.
- Construction work prices were flat month-on-month and dropped
0.2 percent year-on-year.
- Prices in the service sector rose by 1.2 percent on the month
and fell by 0.8 percent year-on-year.
                                
 
COMMENTARY:
                                
 RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MANAGEMENT
                                
 "Annual PPI in Czech industry came in line with our
forecast. However, although industrial PPI was above the market
consensus, average for the third quarter reached 2.2 percent,
which is below the Czech National Bank estimate of 2.8 percent.
                                
 "The central bank may point out that producer prices in
Czech industry were less pro-inflationary than expected in the
third quarter of the year.
                                
 "Nevertheless, agricultural PPI is now rising sharply, which
indicates that also food prices in the CPI basket will act
pro-inflationary in the months to come.
                                
 "All in all, the third quarter brought only gradual increase
of producer prices in Czech industry, but quite sharp
acceleration of prices in agriculture, so there is something for
both doves and hawks in the central bank's board.
                                
 "Still, we keep our view that development of the Czech crown
and the situation in the global economy will be the key factors
for next decisions of the Czech National Bank.
                                
 "We keep our call that first serious discussion on the
possibility of interest rate hike may come only at the December
meeting --if the aforementioned factors allow such discussion.
                                
 "The risk of course is that the Czech central bank may keep
its policy rates at record low level for longer into 2011."
                                
 
                                
 JIRI SKOP, ANALYST, KOMERCNI BANKA
                                
 "Producer prices surprised with month-on-month growth of 0.3
percent, while the market and us expected a decline. In terms of
future development of consumer prices, the path of prices in
agriculture is more important, which grew 3.5 percent month on
month, and seasonally adjusted added 4.4 percent. This indicates
and confirms our view od future pressures on food prices."
                                
 
                                
 JAROMIR SINDEL, CHIEF ANALYST, CITIGROUP PRAGUE
                                
 "In producer prices, there is a month-on-month rise driven
by foodstuffs, and there is probably an upward pressure on other
segments of the industry coming from food prices."
                                
 "We can see the upward pressure from the agrarian sector and
if the rise in commodity prices worldwide will continue, it can
push inflation expectations upwards, which will be a signal for
the central bank. But of course, the crown (exchange rate) will
decide."
                                
 
MARKET REACTION:
                                
 Crown almost flat at 24.455 to the euro <EURCZK=> from
24.450 ahead of the data.
                                
 
BACKGROUND:
- Industrial PPI and agriculture producer prices are watched
closely by the markets as leading indicators for consumer
inflation, which is targeted by the Czech central bank (CNB).

- September consumer inflation   [ID:nPRA005281] [ID:nLDE69A08W]
- August industrial output figures               [ID:nLDE69605P]
- Report on last Czech c.bank rate decision......[ID:nLDE68M1CY]
                                
              [ID:nPRG004388] [ID:nPRA005256] [ID:nPRG004399]
 
LINKS:
- For further details on September producer prices and past
data, Reuters 3000 Xtra users can click on the statistical
bureau's Website:
                                
 http://www.czso.cz/eng/csu.nsf/kalendar/2004-ipc

- For LIVE Czech economic data releases, click on       <ECONCZ>
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- For Czech money markets data click on                <CZKVIEW>
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 (Writing by Jana Mlcochova)