Sharp Rise in Inflation, Steep Fall Expected

In October, Consumer prices rose 8.5 percent year-on-year, a significant 1.6 percentage points higher than in September. There was a month-on-month increase of 0.1 percent. The increase can be attributed to an austerity electricity tariff introduced last October, which initially lowered prices but was later abolished.

The October acceleration of price growth to 8.5 percent was primarily due to last year’s austerity tariff affecting electricity prices. “If we were to exclude this austerity tariff from the calculation, the price increase would have been 5.8 percent,” said Pavla Šedivá, head of the consumer price statistics department at the Czech Statistical Office.

The Czech National Bank also noted that following the introduction of the austerity tariff in October of last year, the price of the consumer basket fell compared to the previous month, the most significant drop in Czech history. This was followed by a record increase in January after the austerity tariff ended, causing the mathematical October year-on-year inflation to shift to a higher level.

Rent and food costs have become more expensive, having the most significant impact on the year-on-year increase in the price level in October. In addition to the factors above, rents increased by 7.9 percent in the housing sector. The second most influential were prices in the food and non-alcoholic beverages sector, with an increase of 3.7 percent.

According to Petr Dufek, an economist at Credit Bank, we are paying more for energy, rent, food in restaurants, accommodation in hotels, clothing and footwear, health, and essentially only motor fuels are currently cheaper.

However, a steep fall in inflation is expected at the beginning of next year. Still, it is currently only speculation whether it will start with a four, three, or even two. It’s not just about new price lists for goods but also about energy and associated fees currently being discussed. “Even before the Christmas holidays, we might see a drop in inflation. Favorable cost conditions for manufacturers and long-term weak demand, resulting in full warehouses of unsold goods, are contributing to this,” added Dufek.