INSTANT VIEW 2-Slovak Sept PPI falls despite forecasts

    BRATISLAVA, Oct 27 (Reuters) - Slovak producer prices fell 
0.7 percent month-on-month in September, despite market 
forecasts for a rise, putting the annual inflation rate for 
factory gate costs (PPI) at 7.5 percent, data showed on Friday. 
 
    KEY POINTS 
PRODUCER PRICES             SEPT 06      AUG 06      SEPT 05 
 pct change month/month      -0.7         +0.6         +0.5 
 pct change year/year        +7.5         +8.8         +5.8 
 - Analysts polled by Reuters had forecast a producer 
price rise of 0.1 percent on a monthly basis in September, and 
8.4 percent on an annual basis <SK/ECON04> <SK/ECON09>.  
 - Of the three PPI categories, prices of industrial products 
fell by 0.7 percent on the month, after a 0.3 percent rise in 
August. 
 - Prices of electricity, gas, steam and hot water fell by 0.8 
percent, month-on-month, in September, down from a 0.9 percent 
rise in the previous month. 
 - Prices of raw materials fell by 1.0 percent, after a 0.1 
percent monthly drop in August. 
 - Within industrial products, refinery goods were down 7.1 
percent month-on-month, after a 0.3 percent rise in August. 
 
    ANALYSTS' COMMENTS 
    MARIA VALACHYOVA, ANALYST, SLOVENSKA SPORITELNA 
    "The figure is positive. The two main factors behind were a 
higher decline in prices of refinery products and energy 
prices." 
    "It should not have an impact on monetary policy because 
producer prices do not have such a strong influence over 
consumer prices. The central bank is mainly watching the 
consumer price index." 
     
    LUCIA STEKLACOVA, SENIOR ANALYST, ING BANK 
    "It's a good figure but it seems to be more a result of 
one-off factors. Now it is more important to watch the 
underlying trend adjusted for these effects." 
    "It will take several months to confirm the downward 
direction. I do not see any major implications for monetary 
policy from this figure, a key reading to watch is the CPI." 
 
    MARKET REACTION: 
 - The Slovak crown showed no immediate reaction to the data. It 
traded at 36.360 per euro as of 0720 GMT. The unit hit a new 
all-time high of 36.250 in early trade, compared with a close of 
36.295 per euro on Thursday. 
     
     
    BACKGROUND: 
 - Slovak producer prices had shot up this year mainly due to 
the higher cost of oil and natural gas. 
 - Accelerating PPI has coincided with increasing risks for 
consumer inflation, which prompted the central bank to raise 
interest rates by 25 basis points in September, a fourth rise in 
2006. 
 - The central bank reiterated a hawkish tone after the 
September monetary policy meeting and said more policy 
tightening was likely this year if upward pressures on prices 
persists. 
 - Analysts widely expect the central bank to raise interest 
rates further in 2006 to slash inflation and make Slovakia 
eligible for adopting the euro in 2009. 
 - The central bank expects to miss its end-2007 consumer 
inflation target of 2.0 percent, but a slowdown in price growth 
in 2008 will allow Slovakia to meet the euro adoption criteria. 
     
LINKS: 
- For further details on September producer prices, Reuters 3000 
Xtra users can click on the statistics office's website: 
    http://www.statistics.sk/webdata/english/index2_a.htm 
 
- For LIVE Slovak economic data releases, click on......<ECONCZ> 
- Schedule of upcoming indicator releases............<SK/ECON09> 
- Summary of short-term economic data forecasts......<SK/ECON04> 
 
- Stories on Slovak currency moves........................[SKK/] 
- Slovak speed money guide ..............................<CZK/1> 
- Slovak benchmark state bond prices .................<0#SKBMK=> 
- Slovak forward money market rates ....................<SKKFRA> 
 
 ((Reporting by Martin Santa and Martin Dokoupil;  
bratislava.newsroom@reuters.com; Reuters Messaging: 
martin.santa.reuters.com@reuters.net; +421 2 5341 8402; editing 
by David Stamp)) 
  Keywords: ECONOMY SLOVAKIA PPI