INSTANT VIEW 3-Czech Feb PPI above mkt fcast

...2 percent, well above the consensus 
market forecast. 
 
KEY POINTS: 
(change in percent)       Feb        Jan        Feb forecast 
 month/month              0.5        1.2        0.2 
 year/year                3.2        2.8        2.8 
 
 (For full table of data...........................[nPRA001197) 
 
- The statistics office says a slowing in growth of electricity, 
gas and water prices to 0.1 percent from 7.5 percent was the 
reason for PPI decreasing month-on-month. 
- Coke and crude oil refinery prices dip 0.3 percent, their 
seven consecutive monthly fall. 
- Separately, the statistical bureau says agriculture producer 
prices rise 0.6 percent in February from January to post a 13.0 
percent year-on-year increase, up from a 2.1 percent annual gain 
a month earlier. 
- The bureau said it had revised the weighting structure from 
2005, but that the calculation of industrial producer and 
construction prices did not change. However, agriculture prices 
and service prices from January 2005 to December 2006 are no 
longer valid. 
 
COMMENTARY: 
    MICHAL BROZKA, ANALYST, RAIFFEISENBANK, PRAGUE 
    "The quickening of producer price growth is speaking in 
favour of future interest rate increases by the CNB (central 
bank). However, their pass through to CPI (consumer inflation) 
is slow and I do not expect any significant reaction of the 
market rates to the data release." 
     
    JAN VEJMELEK, HEAD OF ECONOMICS AND STRATEGY RESEARCH, 
KOMERCNI BANKA, PRAGUE 
    "Producer prices have surprised with higher dynamics for 
several consecutive months. Together with a further acceleration 
of agriculture producer prices and strong household consumption 
this means that monetary-policy inflation may already be past 
its bottom and the central bank will have to keep a close eye on 
its developments.  
    "So far we expect an interest rate increase in the third 
quarter. However, if consumption in particular accelerates 
further and demand-pull inflation starts creeping higher, a rate 
increase could take place in the second quarter." 
 
MARKET REACTION: 
- Crown flat at 28.185 per euro . 
 
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). 
- However, analysts have pointed out the pass-through of changes 
in production costs into overall consumer prices has been 
limited in recent months. 
 
- Feb consumer inflation                         [ID:nL08458496] 
- Jan industrial output figures                  [ID:nL13408467] 
- Report on last Czech c.bank rate decision      [ID:nPRA001176] 
                                [ID:nL01449456] [ID:nLPRA001190] 
 
LINKS: 
- For further details on February 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        
- Instant Views on other Czech data                 [CZ/INSTANT] 
- Overview of Czech macroeconomic indicators            [CZ/ECI] 
 
- Key data releases in central Europe    [CEE-CONVERGENCE-WATCH] 
- For Czech money markets data click on                 
- Czech money guide                                       
- Czech benchmark state bond prices                    
- Czech forward money market rates                       
 
  
  Keywords: CZECH ECONOMY/PRICES