INSTANT VIEW 2-Czech April PPI rise exceeds market fcast

...gate costs to inch 
up to 3.7 percent. 
    Resurgent price growth in the booming economy has led 
markets to expect the central bank (CNB) to return to interest 
rate hikes by July. 
 
KEY POINTS: 
(change in percent)       April      March     April forecast 
 month/month              0.6        0.5        0.4 
 year/year                3.7        3.6        3.7 
 
 (For full table of data...........................[nPRA001301) 
 
- The statistics office says a 6.1 percent monthly gain in coke 
and crude oil refinery costs, a 0.6 percent rise in basic metals 
prices, and a 0.4 percent up-tick in food, beverages and tobacco 
products are the main driving forces of the monthly PPI 
increase. 
- Separately, the statistical bureau said agriculture producer 
prices fell 0.7 percent in April from March to post a 12.5 
percent year-on-year increase, up from a 15.0 percent increase a 
month earlier. 
 
COMMENTARY: 
    JAN VEJMELEK, HEAD OF ECONOMICS AND STRATEGY RESEARCH, 
KOMERCNI BANKA, PRAGUE 
    "Today's data do not mean any significant move forward in 
trying to solve the puzzle of whether the CNB will raise rates 
already at the end of May or two months later. 
    "Because the crown no long works against inflation and the 
new CNB forecast is consistent with a rise in interest rates, we 
expect a rate rise as soon as at the end of May. We expect a 
similar rise in the third quarter. The CNB's key rate should 
thus be 3 percent at the year-end." 
 
MARKET REACTION: 
- Crown steady at 28.280 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 recently. 
 
- April consumer inflation                       [ID:nL10545694] 
                                                 [ID:nL09317767] 
- March industrial output figures                [ID:nL15302934] 
- Report on last Czech c.bank rate decision      [ID:nPRA001284] 
                                 [ID:nPRG000331] [ID:nL26624395] 
 
LINKS: 
- For further details on April 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  
    

[PRAGUE/Reuters/Finance.cz]