(Adds current account data)
By Jana Mlcochova
PRAGUE, Aug 12 (Reuters) - Czech factory gate prices jumped
above expectations in August, but analysts said a plunge in food
costs had bolstered the prospects for a retreat in inflation and
the central bank may still cut interest rates.
Industrial producer prices rose 0.4 percent in August from
July, the statistical bureau said on Friday, dashing analysts'
expectations that prices would stay roughly flat.
Separately, current account data showed a recovery after a
tumble in June, reinforcing views the Czech economy maintains a
solid footing and pointing to further strength of the crown.
The annual producer price growth rate rose to a
three-and-a-half-year high of 5.7 percent, from 5.2 percent in
July, and above the market's 5.3 percent forecast.
But the data also showed a big drop in agriculture producer
prices. They were down 9.8 percent on the month, for a 6.3
percent year-on-year increase, slowing from July's 21.4 percent.
"This is good news for consumer inflation as a whole," said
Jan Vejmelek, head of economic and strategy research at Komercni
Banka.
"It shows that the peak in food prices is behind us, and the
inflation outlook is really positive, meaning it will go down
further and food prices are not inflation risks."
Analysts said the food price drop would support a slowdown
in consumer price growth, which eased to an annual 6.5 percent
in August, from 6.9 percent in July. They said the central bank
could still cut rates, although perhaps slower than previously
thought.
"While industrial prices grew faster than expected,
agriculture prices fell sharply, so the overall picture is
moderately positive," said David Marek, an analyst at Patria
Finance.
"(The PPI numbers) change the outlook for a steep decline in
borrowing costs and we now expect only a gradual decline."
LOWER GAP
Food and fuel prices had spurred price growth globally this
year but are easing as an economic slowdown depresses demand.
Czech food prices shed 0.4 percent and the price of refinery
products dropped 6.1 percent as global prices came off all-time
highs earlier in the summer.
Metal prices held up, growing the fastest since August 2004
and propping up the overall price growth rate.
The country's July current account, reflecting flows of
trade and dividends, showed a 0.31 billion crown ($17.68
million) deficit, manifold narrower than the expected 16.1
billion shortfall as repatriation of profit slowed.
Many foreign investors had collected profits in the second
quarter which saw the Czech crown surging around record levels
below 23.00 per euro, before dropping back to Friday's 24.37.
"The strong data point to low vulnerability of the Czech
economy which should lead to further gains for the crown and
subsequently to reduction in borrowing costs," said Jaromir
Sindel, an analyst at Citi.
For a PPI INSTANT VIEW.............[]
For a PPI TABLE....................[]
( Editing by Ruth Pitchford)
