PRAGUE, May 12 (Reuters) - Czech inflation slowed below
expectations to 1.8 percent in April versus a year earlier, and
industrial output plunged 17.0 percent in March, also worse than
forecast, data showed on Tuesday.
In what economists said was the clear effect of an economic
contraction in Europe that has hit prices and production, data
also showed the Czech jobless rate rose to 7.9 percent of the
workforce in April, from 7.7 percent a month earlier.
Consumer prices dipped 0.1 percent in April versus March for
the lowest annual rate since February 2007. A Reuters poll had
forecast prices growing 2.0 percent year-on-year.
The figure was 2.3 percent in March. The result was below
the central bank's 2009 target, which is for annual inflation of
3 percent, plus or minus 1 percentage point.
Industry fell 17.0 percent year-on-year in March, close to
the flash estimate of -17.5 percent released by the statistics
office on April 30. The figure was a deceleration from a 23.4
percent fall in February, data showed on Tuesday.
Analysts had expected an 14.0 percent annual fall in March.
For table on inflation: []
For table on industrial production: []
For table on jobless: []
MARKET REACTION:
* The Czech crown <EURCZK=> weakened slightly following the
data, dipping to 26.88 to the euro from 26.85. Yields on the
Czech 2-year and 4-year bonds ticked up, according to Reuters
data.
KEY POINTS
* Prices of food and non-alcoholic drinks mainly behind drop
in inflation
* Fall in production mostly due to decline in production of
metals, metal goods, and machinery.
* Production adjusted for number of working days down 19.0
percent year-on-year.
* Overall new orders fell 16.5 percent year-on-year, and new
orders from abroad decreased 15.2 percent.
* Car production down 14.3 percent year-on-year.
COMMENTARY:
RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MANAGEMENT
"Czech inflation is set to fall further in months to come,
mainly due to food and fuel prices but also due to weak domestic
demand and its disinflationary impact on core-inflation items."
"Furthermore, we think that the worst is still to come as
regards the labour market and we expect the unemployment rate to
reach its cycle-peak only at beginning of next year."
"Overall, our feeling from last week's (central bank) press
conference is that they are keeping the door open for the
possibility of another interest rate cut and the data released
today keeps the door open as well."
"Having said that, our baseline scenario expects stability
of the Czech National Bank's interest rates for rest of the year
but the risk for such a call is on the downside."
SIMON QUIJIANO-EVANS, CEE ECONOMIST, CHEUVREUX
"Not a major surprise on the data. The Czechs will deliver
the lowest inflation in the region in the coming months.
Unemployment on the other hand is a major topic in the whole
region."
"The bottom line is that even though we have seen some
improvement, the economy is heading south... But the government
realises it has to do its part."
"The Czech Republic is in a much better position, given that
its budget in previous years was much more restrictive and the
fundamentals were much stronger."
PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT
"Regarding industry, the most interesting thing is the
difference between overall output and exports, which slowed down
their drop, whereas the total output did not that much."
"There is only one conclusion - a massive sell off of
inventories, meaning the economy probably fared rather badly in
the first quarter."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"Inflation and unemployment both showed the same picture."
"Higher unemployment and lower inflation are both connected
to the recession and opens a way for further rate cuts, as it
seems the recession is a bit worse than expected."
"(Industrial data) is a slight correction of figures
released previously... It's the labour market that is more
important for describing the state of the Czech economy."
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(Full table of data............................[])
BACKGROUND:
- March foreign trade figures.....................[]
- Report on last Czech c.bank rate decision.......[]
[] [] [] []
LINKS:
- For further details on March output and sales numbers and past
data, Reuters 3000 Xtra users can click on the Czech Statistical
Bureau's Website:
http://www.czso.cz/eng/csu.nsf/kalendar/2004-pru
- For LIVE Czech economic data releases, click on <ECONCZ>
- Instant Views on other Czech data []
- Overview of Czech macroeconomic indicators []
- Key data releases in central Europe []
- For Czech money markets data click on <CZKVIEW>
- Czech money guide <CZK/1>
- Czech benchmark state bond prices <0#CZBMK=>
- Czech forward money market rates <CZKFRA>
(Reporting by Jana Mlcochova)
