*WHAT: Czech trade on Aug. 6, CPI on Aug. 10
*Price growth headed to 6-yr low, trade in big surplus
*For a TABLE with analysts' estimates click on []
By Mirka Krufova
PRAGUE, Aug 4 (Reuters) - Czech consumer inflation is likely
to have reached a new six-year low in July as food and fuels
continued to push prices down, a Reuters poll showed on Tuesday.
The poll of 15 analysts showed foreign trade, which has
suffered a double-digit drop in both exports and imports as
demand in western Europe dried up, would stay in solid surplus.
Annual inflation (CPI) in July was seen at 0.6 percent,
falling 0.1 percent on a monthly basis on sharply lower food
prices.
"We expect inflation will find a bottom in September to
October, when it should fall to 0.4 percent (year-on-year) and
then grow back to 1.5 percent at the end of the year," Atlantik
FT analyst Petr Sklenar said.
The Czech economy dropped by 3.4 percent in the first
quarter, but the decline has hinted at slowing after early data
last week showed that manufacturing output drop decelerated in
June. []
The trade balance has been strong due to a drop in imports
of raw materials, but improving foreign demand may also begin to
leave a mark.
The poll showed average exepctations of a 14 billion crown
($779.5 million) surplus in June.
Analysts said that despite signs of bottoming, the recession
still has a way to go through the real economy as consumer
demand slackens and unemployment rises.
The poll showed June retail sales likely fell a ninth
straight month, by 3.8 percent, while the unemployment rate was
seen at a more than three-year high in July at 8.4 percent.
RATES ON HOLD?
The Czech central bank has shaved 225 basis points from
interest rates in the past year to an all-time low of 1.5
percent.
Rate setters meet on Aug. 6, the day the release of foreign
trade data will kick off this month's round of data, and
analysts by a majority of one expect the central bank to leave
rates unchanged -- at least until September. []
"Low core CPI actually supports a rate cut debate before the
CNB (central bank) board meetings in early August and
September," said Radomir Jac, chief analyst at Generali PPF
Asset Management.
"Nevertheless, the medium-term outlook is supportive to
stability in interest rates."
The better-than-expected June industrial output flash
estimate has given weight to arguments the central bank will end
its easing cycle.
Analysts say real data, boosted by improvement in western
markets like main trading partner Germany, has started catching
up with forward-looking indicators like the purchasing managers'
index's (PMI) rise to a 10-month high in July. []
(Writing by Jason Hovet; Editing by Richard Balmforth)
