Inflation in the Czech Republic slowed to 15.8 percent in December. Year-on-year prices rose — ČT24 — Czech Television
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Events: Inflation slowed down in the Czech Republic in December
Transport prices had the greatest influence on the December slowdown in inflation. Year-on-year growth in car prices moderated to 9.2 percent from November’s 12.7 percent. Fuels were then more expensive by 4.4 percent, while in November it was 14.5 percent.
Compared to the whole of December, food prices in particular went up. People paid 42 percent more for flour, almost 38 percent more for bread, and roughly 43 percent more for poultry. Semi-skimmed milk became more expensive by 55 percent, eggs by 92 percent, oils and fats by 38 percent, and sugar was almost twice as expensive as a year earlier. In addition, the bird flu epidemic may now adversely affect the price of eggs, for example, some bakeries have been paying 20 pennies more for each egg since last week, and the price increase may also spill over to store shelves.
Housing prices also rose. In a year-on-year comparison, rent was the most expensive by six percent, products and services for routine apartment maintenance by 21 percent, water by more than five percent, sewage by more than six percent, natural gas by 140 percent, solid fuels by two thirds and heat and water warmer by almost 29 percent. Electricity, on the other hand, became cheaper by 21.2 percent.
In December, the prices of goods rose by a total of 17.8 percent and the prices of services by 12.5 percent. In a month-on-month comparison, the prices of goods fell by 0.2 percent, while the prices of services rose by 0.3 percent. “In 2022, the prices of goods increased by 16.8 percent and the prices of services by 12.3 percent,” said Pavla Šedivá, head of the consumer price statistics department of the CZSO.
On Wednesday, the CZSO also published information on the November development of prices in foreign trade. Year-on-year growth in export prices slowed to 9.8 percent from October’s 11.4 percent. In terms of percentage, last November, imports increased by 11.4 percent after a 14.4 percent increase in October. “Veu prices have been rising in the place of occurrence since September 2020, in imports since January 2021,” the statistics said. Monthly prices decreased for the third time in a row, export prices fell by 0.6 percent and import prices by 1.8 percent.
Under the estimate of the CNB
Inflation in December was 3.3 percentage points lower than the Czech National Bank (ČNB) estimated in its autumn forecast. Differences in regulated energy prices in particular, without taking into account the so-called savings tariff, inflation would be 19.3 percent, not 15.8 percent, pointed out the director of the monetary section of the Czech National Bank, Petr Král.
“The negative deviation from the forecast was also dominantly caused in December, similarly to the previous two months, by the development of regulated prices. It reflected the October drop in prices due to the statistical projection of the contribution to the savings tariff,” said Král.
It significantly slowed the growth of fuel prices, which reached six percent, while the CNB expected 21 percent. According to Král, this reflected the development of the oil market as well as the decline in margins in the processing and distribution chain, which was also reflected in the price at gas stations.
Core inflation, i.e. the price development of unregulated commodities excluding food and fuel, decreased by 0.5 percentage points to 13.3 percent in December, but remains high. According to the CNB, its development assumes a gradual weakening of the growth of foreign industrial prices and a dampening of domestic demand.
Although food price growth slowed to 18.8 percent, it still remains high. “This is related to the still high level of prices of agrarian commodities and domestic agricultural producers, reflecting rising energy costs and other economic impacts of the war conflict in Ukraine,” Král pointed out.
“In January, due to the expiration of the energy-saving tariff, a further increase in inflation can be expected, but in the month of 2023, when price growth should have slowed down. The capping of electricity and gas prices from the beginning of this year, following the energy-saving tariff, will, according to the forecast, dampen the growth of regulated prices to a certain extent. Other components of inflation will slow down,” said Král.
In the second half of the year, according to Král, inflation should drop to single digits. The external cooling of domestic demand and the domestic labor market will be reflected. The tightened monetary policy should also take full effect. In the first half of 2024, inflation should reach two percent, Král added.
Analysts: Inflation will accelerate again in January
“The low level of inflation has had a dominant effect on the marked discounting of fuel. The extent of their price decline over the past few years can only be compared to last August and April 2020,” noted UniCredit Bank analyst Patrik Rožumberský. He added that in August of last year, fuels became cheaper by 9.8 percent, in April 2020 by 10.5 percent.
According to the Chief Economist of Creditas Bank Petr Dufek, inflation is the main record drop in the purchasing power of the population and the main drag on the Czech economy. He recalled that last year’s average inflation was the highest since 1993. “However, then the tax system changed and VAT was switched over. This time, we have to look for inflation mainly in food prices, rising housing and catering costs. With exceptions, almost everything went up in price, some goods, such as clothes and shoes, even on a European scale,” he pointed out.
Analysts point out that the value of January inflation will be important for the upcoming development. At the same time, they expect an acceleration in the rate of price growth, as many merchants change their price lists for goods and services in January, in addition, energy prices are expected to rise to price ceilings. “At the beginning of this year, it is certainly necessary to expect a jump in the price of energy up to the price ceilings, and the year-on-year growth of consumer inflation may accelerate to just below twenty percent,” says Akcenta analyst Miroslav Novák.
According to analysts, inflation should slow down in the coming months, but it will still remain at a high level. “For the year 2023, we now estimate inflation at around ten percent, with the fact that it will be above this limit in the first half of the year, and below it in the second half. Pro-inflationary risks are mainly related to a more noticeable prescription of high energy prices in final prices, on the contrary, a significantly stronger recession can be an anti-inflationary risk,” said Jakub Seidler, Chief Economist of the Czech Banking Association.
“The rise in prices in the last year has significantly reduced the standard of living in our country. People lost a significant part of the purchasing power of their savings and could afford to buy fewer goods and services with their income than in previous years. This year will bring improvements, but people’s savings will continue to depreciate and real incomes will decrease,” stated BH Securities chief economist Štěpán Křeček.
90′ CT24: Inflationary pressures will rise again in January
Source: ČT24