Czech Republic: Inflation falls to over five-year low in June
Inflation eased further to 2.0% in June, down from May’s 2.6%. June’s result represented the weakest inflation rate since April 2018. The decline was broad-based, with lower price pressures recorded for housing and utilities, food and non-alcoholic beverages, recreation and culture, and transportation.
Accordingly, the trend pointed down, with annual average inflation falling to 4.9% in June (May: 5.6%).
Finally, consumer prices dropped 0.26% in June over the previous month, which was below May’s flat result. June’s result marked the weakest reading since December 2023.
Our panelists forecast inflation to fall sharply from 2023 levels in 2024. Food prices should decrease due to lower charges for agricultural goods at home and abroad. That said, a firm recovery in private consumption this year may push up price pressures for services; our panelists see inflation continuing to average above the Czech National Bank’s 2.0% target over 2024 as a whole.
Commenting on the latest inflation reading, David Havrlant, economist at ING, noted:
“The food and non-alcoholic beverages section had the most significant negative contribution to annual inflation in June, with prices of many food items in the basket declining by more than 20% from a year earlier. However, food prices tend to be volatile, and the pronounced drop from the previous month might be reversed in the coming months. Therefore, pronounced changes in food prices are usually discounted in the considerations of the Czech National Bank Board. We were aware of the passthrough from the agricultural producer prices, but getting the timing right is challenging in this segment due to changes in margins along the supply chain.”