(Adds central bank comment, background)
PRAGUE, May 12 (Reuters) - Czech consumer prices rose a
touch faster than expected in April and output fell in March for
the first time in over five years, sending divergent signals to
the central bank which has halted its rate-tightening drive.
Monthly inflation reached 0.4 percent, above the 0.3 percent
expected in a Reuters poll <CZ/ECON04>, driven mainly by energy
and food prices, data showed on Monday.
The rise put year-on-year inflation at 6.8 percent, down
from 7.1 percent in March and a nine-year high of 7.5 percent in
January.
Howeever, the decline is slower than expected and the rate
is still far above the central bank's target of 3 percent.
The central bank said the annual rate was just 0.1
percentage points above its forecast due to higher-than-expected
adjusted inflation excluding fuels, which may indicate ongoing
price pressure from the domestic economy [].
But it said the impact of the higher adjusted inflation was
partially offset by a lower-than-expected food price rise,
adding the price spike seen in recent months has peaked.
A separate set of data showed unemployment extending its
drop to all-time lows, hitting 5.2 percent in April from 5.6
percent in March.
"From the point of view of monetary policy, concerns about
secondary impacts from external price shocks are coming back,"
said David Marek, chief economist at Patria Finance.
"It is possible that fears of a rise in inflation
expectations and wage demands will raise the number of votes in
favour of higher rates."
The bank has raised interest rates five times over the last
year to 3.75 percent, but has kept policy unchanged since
February. Many analysts predict the tightening cycle has peaked.
GROWTH SLOWING
Fuel and food-driven inflation has affected emerging markets
across the world and the two factors are often weighted more
heavily in poorer economies.
The main disinflationary factor has been the crown currency,
whose firming dampens import prices in the open economy, but
Pavel Sobisek, chief economist at UniCredit Bank in Prague, said
the pass-through may not have been as big as thought.
"It seems retailers do not feel the urge to rush with
discounts in light of the still strong consumer demand," he
said. "This fact must surely make the CNB nervous, although in
light of an economic slowdown it will not lead to an immediate
rise in interest rates."
Growth of the central European economy is expected to slow
this year to below 5 percent, from last year's 6.5 percent
growth.
Industrial output data for March showed the first drop after
5-1/2 years of growth, adding to previous poor purchasing
managers index (PMI) and foreign trade figures.
Output fell 2.1 percent year-on-year in March, far worse
than a 4.8 rise forecast by analysts <CZ/ECON04> and in stark
contrast to an 11.3 percent rise the previous month.
The Czech data mirrored March results elsewhere in emerging
Europe. In Slovakia, the region's growth leader, output slammed
on the brakes to grow just 1.8 percent.
Part of the drop could be attributed to the Easter holiday,
which came earlier than usual this year.
The crown firmed 0.4 percent to 25.075 to the euro <EURCZK=>
after Monday's data, following a rise in the neighbouring Slovak
crown, which jumped to all-time highs.
(Reporting by Jan Lopatka and Martin Dokoupil; Editing by
Michael Winfrey and Gerrard Raven)
