INSTANT VIEW 2-Czech May PPI rises to 2-yr high, exceeds fcast

14.06.2007 | , Reuters
Zpravodajství ČTK


perex-img Zdroj: Finance.cz

PRAGUE, June 14 (Reuters) - Czech industrial producer prices rose by a faster-than-expected 0.6 percent in May from April, pushing the annual...

...increase to a 2-year high of 4.1 percent. 
    The pipeline inflation pressures are likely to bolster the 
market's view that the central bank (CNB) could raise interest 
rates as early as July following the first hike in 8 months in 
May. 
 
KEY POINTS: 
(change in percent)       May        April      May forecast 
 month/month              0.6        0.6        0.4 
 year/year                4.1        3.7        3.8 
 
 (For full table of data...........................[nPRA001352]) 
 
- The statistics office says a 3.6 percent monthly gain in coke 
and crude oil refinery costs, a 0.8 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 rose 0.3 percent in May from April for a 12.1 percent 
year-on-year rise, down from a 12.5 percent gain a month ago. 
 
COMMENTARY: 
    RADOMIR JAC, ANALYST, PPF ASSET MANAGEMENT, PRAGUE 
    "The PPI data came in on the pro-inflationary side, which 
must be bitter news for the central bank, especially when 
combined with the current weakening of the Czech crown. 
    "The structure of the figure shows that one cannot blame 
only the volatile items such as food or oil prices for the 
increase. Higher than expected PPI, higher than expected CPI, 
more pro-inflationary structure of GDP growth, accelerating wage 
growth, a weaker crown -- there is a full list of arguments for 
the Czech central bank to increase their interest rates again 
soon. The nearest interest rate hike will be delivered most 
likely in July with the new macroeconomic forecast but, strictly 
speaking, the data would favour a rate hike as early as the June 
board meeting. Expect the two week repo rate at 3.25 percent by 
the year-end, if not higher." 
 
MARKET REACTION: 
- Crown little changed after data at 28.566 per euro , 
slightly weaker on the day. 
 
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. 
 
- May consumer inflation                         [ID:nL08529664] 
                                                 [ID:nL08216043] 
- April industrial output figures                [ID:nL12369927] 
- Report on last Czech c.bank rate decision      [ID:nPRA001319] 
                                 [ID:nL31276683] [ID:nL31320495] 
 
LINKS: 
- For further details on May 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  
    

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