INSTANT VIEW 3-Czech Nov PPI dip slightly bigger than fcast

    Czech industrial producer prices 
dipped by a slightly more than expected 0.2 percent in November 
from October, taking the annual index (PPI) to 2.0 percent, a 
touch below the consensus market forecast. 
    Analysts said the release re-inforced market expectations 
that interest rates could hold flat until at least the end of 
the first quarter of 2007, when the central bank might tighten 
policy further. 
 
KEY POINTS: 
(change in percent)       Nov        Oct        Nov forecast 
 month/month             -0.2        0.0       -0.1 
 year/year                2.0        1.9        2.1 
 
 (For full table of data...........................[nPRA001083) 
 
- Crude oil refinery costs fall 1.5 percent month-on-month, 
extending their decline to the fourth consecutive month. 
- Factory-gate costs in the food industry ease 0.9 percent, 
while chemicals prices drop 0.6 percent. 
- Basic metals and metallurgy prices rise 0.3 percent. 
- Agriculture producer prices fall 0.6 percent in November from 
October to post a 1.3 percent year-on-year increase, down from a 
1.9 percent annual gain a month earlier. 
 
COMMENTARY: 
    DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE, PRAGUE 
    "The PPI index brings essentially no impulse to 
deliberations about interest rates. 
    "The inflation waters are, in effect, very quiet on all 
fronts." 
     
    JAN VEJMELEK, HEAD OF ECONOMICS AND STRATEGY RESEARCH, 
KOMERCNI BANKA, PRAGUE 
    "The below-consensus price dynamics in industrial producer 
prices fits the context of the current favourable inflation 
environment and shows that the CNB's (central bank's) inflation 
prediction will indeed be lowered in January. 
    "We only expect an (interest) rate increase towards the end 
of the first quarter of 2007." 
 
MARKET REACTION: 
- Crown steady at 27.890 per euro . Money market rates 
and debt yields 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 in recent months. 
 
- Nov consumer inflation                         [ID:nL08309748] 
- Oct industrial output figures                  [ID:nL12357215] 
- Report on last Czech c.bank rate decision       [ID:nL3091748] 
                                 [ID:nPRA001058] [ID:nPRA001059] 
 
LINKS: 
- For further details on November 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                       
 
 ((Writing by Marek Petrus; Editing by Alan Crosby; 
prague.newsroom@reuters.com; Reuters Messaging: 
marek.petrus.reuters.com@reuters.net; +420 224 190 477)) 
  Keywords: CZECH ECONOMY/PRICES  
    

[PRAGUE/Reuters/Finance.cz]