Industrial producer prices
A week ago the report was releasedthat the rate of consumer inflation is accelerating. Today showedthat manufacturing inflation has also begun to gather momentum. Industrial producer prices (the so-called PPI index) rose by 0.1 % month-on-month in October. Year-on-year, industrial producer prices increased by 0.8 % (up from 0.6 % in September). However, a somewhat stronger acceleration in industrial inflation was still expected. This is also not happening because demand for industrial goods is still subdued. Stagnant Germany, for example, is to blame. In addition, there is fear in the industry about what tariff restrictions will come after the return of D. Trump's return to the White House. This will be another brake on higher price growth in industry.
When evaluated by main industry groups, prices of investment goods rose mainly by 2.8 %, energy by 0.3 % and non-durable goods by 1.9 % year-on-year. In contrast, prices of intermediate goods decreased by 0.6 %. Industrial producer prices excluding energy would have been 1.1 % higher in October (up 0.9 % in September).
Agricultural producer prices
Agricultural producer prices increased by 6.9 % month-on-month in October. Year-on-year, they were higher by 2.4 %. The long period of deflation in agriculture is over. Meanwhile, agricultural prices have fallen steadily since May 2023. Year-on-year, both major components of agricultural prices rose in October. In crop production, prices rose only slightly by 0.5 %. Prices for oilseeds and fruits were higher by 12.0 % and 35.1 %, respectively. In livestock production, prices rose more significantly by 7.1 %. Cattle prices increased by 10.5 % and milk by 15.8 %. It is the more expensive milk, which in turn makes a whole range of other food products more expensive, that contributes significantly to the rise in inflation. The fall in agricultural prices is over for a longer period. This will be reflected in the fact that the end prices of food on the shelves of shops will also start to rise steadily. The Christmas period is a good time for this to happen. This will deprive consumer inflation of its important brake.
Prices of construction works
The prices of construction work and of materials and products consumed in the construction industry rose by 0.3 % m-o-m in October. Construction work prices are estimated to have increased by 2.3 % yoy in October (2.1 1 % in September after refinement). However, prices of materials and products consumed in the construction sector were only 0.8 % higher year-on-year.
Expected market reaction
The koruna weakens slightly to 25.29 CZK/EUR this morning. The acceleration of the inflation rate at the beginning of the production chain (albeit only slightly) added another indication that the Czech National Bank (CNB) may pause the interest rate cut cycle in December. Yet, the minutes of the CNB's last board meeting on Friday already show that central bankers also consider a weaker koruna to be a risk to further inflation developments. It is for these reasons that we are betting that the scope for further weakening of the koruna is no longer significant.
Jiří Cihlář
Eurodeník 18. 11. 2024 Next Finamce s.r.o. Nextfinance.cz
ILLUSTRATIVE PHOTO - pixabay
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