In June, the Czech Republic witnessed the largest annual decrease in food prices across the European Union, with a significant drop of 4.8%. In contrast, Hungary, which ranked second, saw a reduction of just over two percent. Data released by the Czech Statistical Office suggests that this trend may not continue for much longer. While food prices could still fall depending on the harvest, the extent of the reductions is expected to diminish.
According to Dominik Rusinko, an analyst at ČSOB, the Czech Republic remains a leader in food price reductions, contributing to a surprising decline in overall inflation. “Food prices only decreased in five EU countries and, on average, increased by 1.3% year-over-year,” Rusinko noted in his analysis. This rapid decrease in food prices has been a key factor in the country’s overall inflation rate reduction.
However, there are signs that this trend may soon reverse. Agricultural producer prices in June, while down 7.5% year-over-year, increased by 1.9% month-over-month. For instance, the price of fresh vegetables rose by 13.3% compared to May, poultry by 3.5%, and pork by 0.3%. Conversely, egg prices fell by 4.5%. These mixed signals indicate that the positive trend in food prices may not persist.
Rusinko cautions that the significant positive development in year-over-year comparisons is unlikely to continue. “In the second half of the year, the deflationary impact of food prices on overall consumer inflation will gradually fade, which is one reason we expect a slight increase in inflation to around three percent by the end of the year,” he explained. June’s month-over-month inflation rate was two percent.
In summary, the Czech Republic’s food prices are expected to stabilize rather than continue their rapid decline. “There is still room for price reductions, but not as much as before,” Rusinko added. The future trend in food prices will largely depend on the harvest outcomes.
Peter Dufek, the chief economist at Creditas Bank, emphasized that the future of food prices hinges on the harvest. “If the harvest is favorable, fears of rising food prices will likely be unfounded,” he stated. However, fruit prices could be problematic this year due to adverse weather conditions impacting the yield.