Slovak CPI eases to 10-month low, trade gap jumps

BRATISLAVA, Nov 10 (Reuters) - Slovak annual consumer inflation eased to a 10-month low of 3.7 percent year-on-year in October thanks to a fading impact of energy price increase from last year, data from the Statistics Office showed on Friday.

In a separate release, the office also said the foreign trade deficit widened sharply in September, which pushed the Slovak crown down despite lack of details of the trade figures.

On the month, consumer prices grew by 0.2 percent in October, after a 0.3 percent decline in the previous month. Annual inflation was 4.6 percent in September.

The market had expected monthly inflation of 0.1 in October, for an annual rate of 3.6 percent.

"The annual decline is because of the basis effect, when prices of energies rose significantly in October 2005," said Silvia Cechovicova, analyst at CSOB bank in Bratislava. "A decline in transportation prices also had a positive impact."

The central bank (NBS) has lifted interest rates by 175 basis points to 4.75 percent in four steps this year because of uncertainty over oil prices and risks of demand-led pressure on shop prices stemming from strong economic growth.

The NBS sets its inflation targets according to EU standards as part of Slovakia's preparation for joining the euro in 2009. Local figures usually show only small differences from the EU norm data, which are due next week.

Earlier this month, the central bank revised downwards its end-2007 inflation forecast, but at 2.6 percent by EU standards, it is still well above the bank's target of 2.0 percent.

The falling inflation rate was overshadowed by a sharp rise in the trade deficit in September.

The Statistics Office reported foreign trade gap of 9.46 billion crowns ($334.9 million), compared with analysts' prediction of a 2.1 billion crown deficit.

The crown fell after the trade data to 36.230 per euro, from 36.160 shortly before the release.

"It (the result) is a big surprise. We might see a crown correction, which had been looming and this can start it off," said Miroslav Plojhar, the chief economist at Citibank Czech Republic.

((Reporting by Martin Santa; writing by Martin Dokoupil, editing by Chris Pizzey; Reuters Messaging: martin.dokoupil.reuters.com@reuters.net; +421 5341 8402))

Keywords: ECONOMY SLOVAKIA CPI