* WHAT: Dec unemployment and CPI
* WHEN: Jan 11 at 0800 GMT
* FCAST:CPI 1.0 pct yr/yr, 0.2 pct m/m, unemployment 9.3 pct
By Mirka Krufova and Jana Mlcochova
PRAGUE, Jan 5 (Reuters) - Czech December unemployment probably hit its highest level in almost five years, counterbalancing a jump in inflation that analysts said was due to higher commodity prices and not rising demand.
The Czech economy has begun to recover, having put the worst of its slump behind it. But the central bank does not see a sustained rally before the end of the year and expects unemployment to rise until 2011.
INFLATION
The median forecast of 14 analysts showed consumer prices <CZCPI=ECI> rose 1 percent in December versus a year ago, clinging onto the bottom edge of the central bank's target band.
It would be an acceleration from November's 0.5 percent. The Czech central bank targets annual consumer inflation at 2 percent, +/- 1 percentage point.
Price growth was driven not by demand-led pressures but mainly a pick up in food and fuel prices, which the central bank exempts as it cannot affect them with its rates decisions.
Month-on-month inflation was forecast at 0.2 percent, the same as in November <CZCPI=ECI>.
MARKET REACTION
Higher than expected price growth, along with any signs of demand-led price pressures, could bring a moderate strengthening in the crown <EURCZK=> as it would boost likelihood of higher monetary policy rates.
UNEMPLOYMENT
Expectations of weak price pressure are supported by a forecast for further rises in unemployment, which stems wage growth and curbs consumer demand.
Twelve economists produced a median forecast for post-Christmas downsizing to drive the rate <CZUNR=ECI> up to 9.3 percent in December, from 8.6 percent in November.
It would be the highest since March 2005's 9.4 percent. The central bank expects an average 2010 jobless rate of 9.8 percent, and 10.7 percent for 2011, which would be the highest number on available records.
MARKET REACTION
If the unemployment number is better than expected, it may point to a quickening recovery, although analysts usually say they need more than one month's figure to discern a trend.
BACKGROUND
Most economists expect the central bank to stay put for months ahead due to the weak price pressures and a fragile recovery, although Vice Governor Mojmir Hampl said on Tuesday time for rates to rise was nearing. [
]Analysts polled by Reuters do not expect a hike until at least the middle of the year, with the main repo rate forecast at 1.75 percent at the end of 2010. [
]The central bank trimmed rates by a total of 275 basis point over the last year and half, with the last 25 basis point cut in December bringing the main rate to 1 percent, a record low.
Industry is expected to continue to suffer, although Czech November preliminary industrial output rose by 0.2 percent year on the year, following a 7.2 percent drop in October.
A scrap subsidy scheme in Germany, the Czechs' biggest export market, slowed a fall in exports earlier in the year. But it ended in September.
Meanwhile, the number of Czech company bankruptcies rose by 42 percent last year to 1,480, according to Czech Credit Bureau. That is expected to rise until at least the middle of 2010 due to a lack of orders, causing more lay-offs.
For Czech December macro preview table: [
]Czech stats office website: www.czso.cz
Czech labour and social affairs ministry www.mpsv.cz
All Czech economic data: <ECONALLCZ>
Central and Eastern Europe market report: <CEE/>
(Reporting by Jana Mlcochova)