As of July, inflation continued to slow down in the Czech Republic, dropping below nine percent. This is the consensus among analysts surveyed by the ČTK news agency. According to them, the decline in year-on-year inflation is mainly due to the impact of last year’s comparison base. Consumer prices rose compared to the previous month, mainly due to the cost of recreation. The year-on-year inflation rate in June was 9.7 percent, the lowest since December 2021. The Czech Statistical Office (ČSÚ) will release data on July inflation on Thursday.
Factors Affecting Inflation
“Annual inflation dropped below ten percent in June for the first time since January 2022, and we expect it to continue to decline in July. This will be mainly due to the impact of the comparison base, but other factors are also working to combat inflation. The most significant of these is the diminished household consumption,” said analysts at Česká spořitelna. They estimate the year-on-year growth in consumer prices to be 8.9 percent.
Raiffeisenbank analysts predict even lower inflation for July, at 8.6 percent. “Higher inflation is caused mainly by rising food prices and regulated items, even though their impact has gradually declined since the beginning of the year. In the case of regulated prices, the high comparison base and the government-imposed ceiling have a positive effect,” they said.
Calm in Food Prices
“July should bring further calm to food prices, which could decrease slightly from month to month. We also expect favorable developments in clothing and footwear categories and home furnishings, where we expect cosmetics to become cheaper. On the other hand, fuel and recreation have become more expensive, and with the arrival of summer holidays, standard seasonality will play a role. This will also affect providers of catering and accommodation services, who will also increase their prices. Overall, the month-on-month inflation rate should reach 0.4 percent, corresponding to a year-on-year value of 8.7 percent,” said Vít Hradil, chief economist at Cyrrus.
According to experts, inflation will not decline as rapidly in the coming months. “We expect that the decline in overall inflation will significantly ease in the coming months after the effect of the higher comparison base fades away, and inflation will remain near eight percent year-on-year in the second half of this year,” said analysts at Komerční banka.
“In the fourth quarter of this year, the decline in inflation will likely stop, and on the contrary, it may increase. However, this will not be caused by economic developments but rather by the savings tariff from last year, which was included in inflation data as a significant reduction in electricity prices, resulting in a low base for year-on-year inflation during the fourth quarter of this year,” said analysts at Česká spořitelna.
Inflation is a crucial economic factor, and all Czech citizens can feel its effects. As such, keeping a close eye on inflation rates and their trends is essential to ensure the country’s stable and prosperous economic future.