Czech PPI: +0.3% m/m, +8,0% y/y

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Investiční bankovnictví KB

      Our and market forecast was based on an only slight deceleration in prices of oil and steel products. However, prices in basic metals and fabricated metal product rose only by 1.6% and coke, refined petroleum product only by 0.6% in comparison with +3.4% and 4.7%, respectively, in the previous month. September’s price development in other branches did not deliver any surprise. The year-on-year growth at 8% is a result mainly of the two branches mentioned above. Other branches of manufacturing remain on very low inflationary levels. We can see a year-on-year deflation in branches of Transport equipment and Electrical and optical equipment.

      

       After a decrease in food prices within September’s CPI, risks for agricultural producer prices were biased to lower price dynamics. A month-on-month drop of –2.0% is really significant. The year-on-year price growth dramatically decelerated to only 1.0% from 5.9% in August. Agricultural prices are positively influenced by this year’s bumper crop. Food prices should push headline inflation figures lower in the months ahead.

      

       The lowest producer prices rise this year suggests that room for further price acceleration seems to be limited. At the same time we can see first signs that the Chinese economy has reached the ceiling. Because this year’s dynamic in producer prices was caused mainly by the costs factor (oil and steel prices), the central bank had a tendency to ignore them. However signs of a year-on-year deceleration should, in combination with the central bank’s latest dovish comments, strengthen expectations of no immediate reasons for rate hiking. We keep our assumptions unchanged – we still expect one hike by 25bp by the end of the year, most likely in November.

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