Inflation fell below ten percent in June. According to analysts, the causes are a strong CZK and lower demand.
Effects on inflation
For the first time since January 2022, the pace of consumer price growth slowed down in June, and inflation dropped below 10%, according to analysts. They argue that both the strong currency and lower demand have had a significant effect on reducing inflation. In May, inflation was at 11.1%. Official inflation data for June will be published on Thursday by the Czech statistical office. “We estimate the annual inflation rate for June to be 9.7%,” according to Raiffeisenbank analysts. “The main contribution to the disinflation process is the decline in fuel prices, which have fallen by over twenty percent on an annual basis. The reason is the high comparative base of last year when fuel prices reached historical highs during the summer,” they added. The discounting of electricity and gas on exchanges and the effect of the government cap should lower regulated prices. Conversely, according to analysts, the element that contributes to keeping inflation high is the price of food products.
Factors maintaining high inflation
“Compared to May, there has probably been a slight further increase in food prices, and with the arrival of the tourist season, prices of recreational activities have likely also risen. Price increases appear to have continued in the restaurant and accommodation services sector, as well as in clothing and footwear. On the other hand, relief should come in the housing category, where there could be a slight decrease in prices. Compared to May, stagnant fuel and appliance prices will enter inflation in a nearly neutral manner,” evaluated Vít Hradil, the chief economist at Cyrrus. According to his perspective, the price level increased by 0.4% compared to May, resulting in an annual inflation rate of 9.8%.
Forecasts of further decline
According to analysts at Česká spořitelna, the annual inflation rate in June was 9.8%. “In addition to the influence of the comparative base, there are several anti-inflationary factors, the most significant of which is low household consumption, declining energy and fuel prices, and weakened inflation due to the strong currency. The increase in food prices is also more moderate, although uncertainty about their future development remains considerable and bilateral,” they asserted. In the coming months, analysts at Česká spořitelna predict a further easing of inflationary pressures, which they believe will drop to 8.6% in July and 8.2% in August. The analysts presume that by early 2024, the rate of price growth should reach the three percent level.
Sources: https://www.novinky.cz/; https://www.ceskatelevize.cz/
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