Inflation in the Czech Republic is slowing down

In the Czech Republic, consumer price inflation has slowed. The annual inflation rate reached 15.1 percent in October. This is 2.9 percent lower than in September. Month-on-month inflation even fell by 1.4 percent. The Czech Statistical Office (CSO) published the data on Thursday.

“The biggest influence on the price level in October was the government’s austerity measures for households in the form of energy subsidies. Thanks to the reflection of the savings tariff in electricity prices and the zero charge for supported energy sources, prices decreased by 1.4 percent compared to September. This was the only month-on-month price decrease since December 2020,” said Pavla Šedivá, head of the consumer price statistics department at the CSO.

Thanks to the energy-saving tariff, electricity prices showed the most significant month-on-month drop, by 53.9 percent. On the other hand, natural gas prices increased by 2.7 percent, while solid fuels rose by 8.4 percent.

Soft drinks (up 3 percent), vegetables (up 9.4 percent), sugar (up 54.3 percent), eggs (up 27 percent), and poultry (up 2.5 percent) also increased in price month-on-month. In the clothing and footwear section, clothing and footwear prices were higher by 3.6 percent and 4.5 percent, respectively.

On a year-on-year basis, the most significant contributor to the overall slowdown in inflation was a 38.2 percent fall in electricity prices. “On the other hand, in the food and non-alcoholic beverages section, the year-on-year price growth accelerated again. Prices of bakery products, cereals, and meat were higher by 29.1 percent, meat by 26.6 percent, eggs by 52.8 percent, fruits by 7.6 percent, vegetables by 24.4 percent, and sugar by 105.4 percent,” the CSO said.

Analysts anticipate erratic growth

Jakub Seidler, the chief economist at the Czech Banking Association, admitted that October inflation was significantly lower than analysts had expected. However, he noted that their estimates were very uncertain precisely because of government measures.

“Inflation figures will be volatile until the end of the year. However, the impact of the austerity tariff will continue until the end of the year. However, the focus is beginning to shift to January inflation in particular, which the finance ministry sees at 15 percent, while a fall in inflation below 10 percent could then occur around the middle of the year. For the whole of next year, however, inflation will still be around the 10 percent mark,” Seidler added.

However, according to Akcenta analyst Miroslav Novak, the year-on-year slowdown in October inflation should not be seen as an inflationary peak. He expects a reacceleration in the coming months.

“The highly volatile development of consumer inflation will continue in the coming months. In November and December, the development of consumer prices will be distorted by the lower statistical base from the end of last year, when the zero VAT rate on electricity and gas was temporarily applied. From the beginning of the new year, energy prices will rise to the price ceilings, and the effect of the savings tariff will fade away,” Novák said.