Czech Republic: Producer prices decline by faster 3.4 per cent in January

The Czech producer prices fell by faster 3.4% y/y in January after 2.9% drop in December, according to data released by the Czech stats office on Monday. Decline surprised the market that expected producer price fall to decelerate to 2.3% y/y in January. Producer prices fell by 1.6% m/m whereas the market expected only 0.4% drop.

Detailed data showed the accelerated decline of producer prices came mostly with the deepening 6.6% fall of prices in mining and quarrying and the faster 4.0% decline of prices in utility sector on the back of 6.2% power price decline. Prices in manufacturing were down by 3.3% y/y in January, as within them price fall deepened for basic metals and transport equipment. Other data by the stats office showed agricultural producer prices decreased by 1.2% m/m in January which brought upon a 1.2% y/y decline after three months of annual growth. This may imply upward food prices pressures seen on the headline inflation in January would subside in the months to come. Overall deepening producer price fall suggests we are heading to another year with lack of supply-side pressures on the headline inflation so the CNB would have to rely solely on household demand to help inflation return to the 2% target, possibly in H1 2017. Thus it would again closely watch nominal wage growth and consumer sentiment before making any monetary policy adjustments.

PPI inflation, % y/y
May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16
Industry (% y/y) -2.1% -2.3% -3.0% -3.7% -4.2% -3.9% -3.7% -2.9% -3.4%
Mining and quarrying 0.3% 0.6% 0.4% -0.3% -1.7% -1.4% -0.6% -0.5% -6.6%
Manufacturing -2.7% -2.8% -3.6% -4.7% -5.2% -4.9% -4.6% -3.5% -3.3%
Food products, beverages and tobacco -3.0% -2.5% -2.6% -2.6% -2.4% -1.6% -1.5% -1.6% -1.6%
Coke, refined petroleum products and nuclear n/a n/a n/a n/a n/a n/a n/a n/a n/a
Basic metals and fabricated metal products -0.5% -0.5% -1.3% -2.3% -2.5% -2.9% -4.3% -4.6% -5.1%
Electrical and optical equipment 0.3% 0.1% 0.2% 0.0% -0.1% -0.1% -0.3% -0.3% 0.3%
Transport equipment 0.0% -0.2% -0.7% -1.4% -0.9% -1.1% -1.6% -1.6% -2.6%
Electricity, gas and water -0.7% -0.7% -0.7% -0.8% -0.8% -0.9% -0.9% -0.9% -4.0%
Source: Czech stats office

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