INSTANT VIEW 3-Czech July PPI ebbs from two year high

...costs to ebb 
to 4.1 percent from a 2-year high of 4.6 percent the previous 
month. 
**************************************************************** 
KEY POINTS: 
(change in percent)       July       June      July forecast 
 month/month              0.2        0.7        0.4 
 year/year                4.1        4.6        4.4 
 
 (For full table of data...........................[nPRA001439]) 
 
    - Separately, the statistical bureau says agriculture 
producer prices held flat in July from June for a 11.3 percent 
year-on-year increase, up from a 9.1 percent gain a month ago. 
 
COMMENTARY: 
    VOJTECH BENDA, SENIOR ECONOMIST, ING BANK, PRAGUE 
    "The continuing strong growth in agriculture producer 
prices, especially in grain prices, is raising the risk of price 
pressures spilling over into faster growth in food prices, and 
therefore higher overall consumer inflation. 
    "The impact on food prices will, however, be muted given the 
strong competitive position of retail chains and limited 
purchasing power of households." 
 
    MICHAL BROZKA, ANALYST, RAIFFEISENBANK, PRAGUE 
    "On one hand, PPI slowed more than expected, but on the 
other hand year-on-year growth in producer prices remains high. 
    "From the point of view of monetary policy, this number is 
unlikely to change much. Provided nervousness on global markets 
abates and the central bank trusts its inflation forecast, then 
it is still likely that interest rates will rise by 25 basis 
points at the August (policy) meeting." 
     
    DAVID MAREK, CHIEF ANALYST, PATRIA FINANCE, PRAGUE 
    "I think it is important to note that this is the third 
number in a row favouring a slower pace of interest rate 
increases from here. 
    "This month, we have received lower than expected CPI, 
industrial output and now it is PPI, which seems to suggest that 
inflation pressures do exist in the economy but probably they 
are not as strong as to warrant an interest rate increase as 
early as this month. A hike may be more likely to come only in 
September or October." 
 
MARKET REACTION: 
- Crown stagnates at 28.005 per euro  by 0717 GMT. Debt 
yields and money market rates flat to slightly lower. 
 
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). 
 
- July consumer inflation                        [ID:nL08620278] 
                                 [ID:nL08145120] [ID:nPRA001429] 
- June industrial output figures                 [ID:nL13698020] 
- Report on last Czech c.bank rate decision      [ID:nPRA001407] 
 [ID:nPRA001420] [ID:nL03817639] [ID:nL26800751] [ID:nL03732730] 
 
LINKS: 
- For further details on July 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]