* What: January inflation, December industrial output
* When: Feb. 9 (CPI), Feb. 11 (Industrial output)
* Inflation seen dropping below c.bank target range,
industrial output again to show double digit plunge
By Mirka Krufova
PRAGUE, Feb 3 (Reuters) - Czech industry output is expected
to have contracted by 11 percent in December after an even
bigger double-digit tumble the previous month, and January
inflation is seen falling below the central bank's target, a
Reuters poll showed on Monday.
A poll of 14 analyst groups put annual consumer price
inflation at 1.7 percent in January, down from 3.6 percent in
December and its lowest since February 2007, boosting the case
for a significant cut in interest rates.
The poll saw output sliding by 11 percent compared with a
year earlier. Such a figure would be an improvement over
November's much-worse-than-expected 17.4 percent plunge but
would bode ill for an export-driven economy that has taken a
beating due to a collapse in demand from the euro zone.
Some analysts have suggested slowing price growth could
actually raise the spectre of deflation and drive down interest
rates, despite a swift decline in the crown since last summer.
Many also say the Czechs could face recession.
"Every new piece of information from the economy lately has
been increasing the likelihood of deflation and affirms to the
markets that the Czech economy will go through a recession this
year," said Tomas Vlk, an analyst at Patria Finance.
The central bank targets inflation at 3 percent, plus or
minus 1 percentage point, and analysts see the rate dropping to
below the mid-point target this quarter due to falling consumer
spending and lower food and commodity prices.
OUTPUT HIT
Once seen as relatively insulated from the global crisis,
Central Europe's previously fast-growing economies have taken it
on the chin in recent months, with the Czech Republic and Poland
now seen struggling to produce any growth and Hungary to slide
deeper into negative territory than earlier thought.
Czech Finance Minister Miroslav Kalousek, upbeat as recently
as last week, said for the first time on Monday the economy
could contract this year, undershooting his ministry's 1.4
percent growth forecast.
"If you're looking at the euro zone contracting severely,
then of course the Czech Republic, just like the rest of central
Europe, could go in negative territory," said Raffaella Tenconi,
an economist at brokerage Wood & Co.
"I think the strength of the Czech Republic is that the
central bank is cutting rates very aggressively and the
depreciation of the currency will help."
The crown has lost almost 18.7 percent since a record high
of 22.9 per euro hit in July 2008.
The weakening currency has been of little concern to the
central bank at a time of a sharp drop in inflation and a need
to boost the export sector, although some central bankers have
said crown weakness limits the scope for cutting rates.
The bank next meets on rates on Thursday, the same day as
the European Central Bank, whose main benchmark rate stands at
2.00 percent.
Most analysts expect the Czechs to trim the cost of money by
50 basis points to 1.75 percent, a historic low last seen in
2005. Policymakers have cut rates by 150 basis points since
August to 2.25 percent.
For TABLE with analysts' forecasts, click on []
(Writing by Jana Mlcochova; editing by Stephen Nisbet)
