INSTANT VIEW 3-Czech March PPI above market forecast

...annual increase to 3.6 percent, its 
highest level in nearly two years. 
 
KEY POINTS: 
(change in percent)       March      Feb       March forecast 
 month/month              0.5        0.5        0.3 
 year/year                3.6        3.2        3.4 
 
 (For full table of data...........................[nPRA001250]) 
 
- The statistics office says a 5.2 percent monthly gain in coke 
and crude oil refinery costs and a 1.4 percent rise in chemicals 
prices are the main driving forces of the monthly PPI increase. 
- Separately, the statistical bureau said agriculture producer 
prices rose 2.0 percent in March from February to post a 15.0 
percent year-on-year increase, up from a 13.0 percent annual 
gain a month earlier. 
 
COMMENTARY: 
    JAN VEJMELEK, HEAD OF ECONOMICS AND STRATEGY RESEARCH, 
KOMERCNI BANKA, PRAGUE 
    "Both industrial and agriculture producer prices rose and 
this fits the picture of a gradual increase in inflation from 
the previous extremely low levels. 
    "What will be key for a further assessment of interest rate 
developments will be an updated inflation forecast by the 
central bank, which the bank board will discuss at the end of 
April." 
     
    PETR DUFEK, ANALYST, CSOB BANK, PRAGUE 
    "The sharp industry price rise is attributable primarily to 
crude oil. Its price rise can already been seen and will 
continue to be seen in headline inflation as well. 
    "Today's number is not favourable from the point of view of 
agriculture prices either. It is likely that food price rises in 
(headline consumer) inflation will continue for a few more 
months. 
    "Despite all this, inflation pressures remain moderate and 
are only due to cost-push factors. Even though this is 
unpleasant news, it should not change the central bank's 
interest rate policy." 
 
MARKET REACTION: 
- Crown steady at 27.985 per euro  by 0711 GMT. 
Government debt yields mixed and little changed. 
 
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 recently. 
 
- March consumer inflation                       [ID:nL10126435] 
- Feb industrial output figures                  [ID:nL11620237] 
- Report on last Czech c.bank rate decision      [ID:nPRA001221] 
                 [ID:nL06735130] [ID:nPRA001222] [ID:nL29598110] 
 
 
LINKS: 
- For further details on March 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