PRAGUE, May 12 (Reuters) - Czech consumer prices rose a
touch faster than expected in April and output fell in March for
the first time in over five years, sending divergent signals to
the central bank which has halted its rate-tightening drive.
Monthly inflation reached 0.4 percent, above the 0.3 percent
expected in a Reuters poll <CZ/ECON04>, driven mainly by energy
and food prices, data showed on Monday.
The rise put year-on-year inflation at 6.8 percent, down
from 7.1 percent in March and a nine-year high of 7.5 percent in
January, but a slower decline than expected and still far above
the central bank's target of 3 percent.
A separate set of data showed unemployment extending its
drop to all-time lows, hitting 5.2 percent in April from 5.6
percent in March.
"From the point of view of monetary policy, concerns about
secondary impacts from external price shocks are coming back,"
said David Marek, chief economist at Patria Finance.
"It is possible that fears of a rise in inflation
expectations and wage demands will raise the number of votes in
favour of higher rates."
The bank raised interest rates five times over the last year
to 3.75 percent, but has kept policy unchanged since February.
Many analysts predict the tightening cycle has peaked.
The main disinflationary factor has been the crown currency,
whose firming dampens import prices in the widely open economy,
but Pavel Sobisek, chief economist at UniCreditBank in Prague,
said the pass-through may not have been as big as thought.
"It seems retailers do not feel the urge to rush with
discounts in light of the still strong consumer demand," he
said. "This fact must surely make the CNB nervous, although in
light of an economic slowdown it will not lead to an immediate
rise in interest rates."
GROWTH SLOWING
The central European economy is expected to slow this year
to below 5 percent, from last year's 6.5 percent growth.
Industrial output data for March showed the first drop after
five and a half years of growth, adding to previous poor
purchasing managers index (PMI) and foreign trade figures.
Output fell 2.1 percent year-on-year in March, far worse
than a 4.8 rise forecast by analysts <CZ/ECON04> and a slump
from an 11.3 percent rise in the previous month.
The Czech data mirrored March results elsewhere in emerging
Europe. In Slovakia, the region's growth leader, output slammed
on the brakes to grow just 1.8 percent.
Part of the drop could be attributed to the Easter holiday,
which came earlier than usual this year.
First quarter gross Czech domestic product data are due out
on May 15. Analysts predicted a 5.7 percent rise in a Reuters
poll <CZ/ECON17> conducted ahead of a worse-than-expected March
foreign trade report on May 6.
The crown firmed 0.4 percent to 25.075 to the euro <EURCZK=>
after Monday's data, following a rise in the neighbouring Slovak
crown, which jumped to all-time highs.
(Reporting by Jan Lopatka; Editing by Michael Winfrey)
