Year-on-year growth in consumer prices accelerated to 8.5 percent in October from 6.9 percent in September. This happened after the previous eight months of reducing the rate of inflation. However, the figure for October is affected by the fact that a year ago statisticians included the government’s energy saving tariff in the calculation as a discount on electricity. Without this influence, year-on-year inflation would have been below six percent this October. The Czech Statistical Office (CZSO) announced this on Friday. In a month-on-month comparison, consumer prices rose by 0.1 percent in October. According to analysts, the year-on-year increase in inflation in October was of a technical nature and inflationary pressures are falling.
“The acceleration of year-on-year price growth to 8.5 percent in October was primarily due to last year’s effect of the cost-saving tariff on the price of electricity. If we had not included this cost-saving tariff in the calculation, the price increase would have been 5.8 percent,” said Pavla Šedivá, head of the Consumer Price Statistics Department of the CZSO.
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The prices of goods in October rose by 10.1 percent compared to last year. For services, statistics recorded an increase of 6.1 percent. Housing prices had the biggest influence on the year-on-year increase in price levels in October, and in second place were the prices of food and soft drinks.
Rents in apartments went up by almost eight percent, water by 16.3 percent and sewage by more than a quarter. Electricity prices statistically accelerated year-on-year growth to almost 150 percent, which was reflected in the energy-saving tariff calculated just last year. Without this influence, the price of electricity this October would have been higher by less than 25 percent year-on-year, according to statistics.
The second most affected were the prices of food and non-alcoholic beverages, which, according to statistics, rose by 3.7 percent. Year-on-year bread prices rose by around five percent and vegetables by 12.4 percent, while potato prices rose by almost half year-on-year compared to last October. But it made eggs cheaper, by 6.2 percent, or sugar, the price of which fell by more than a tenth year-on-year.
In the recreation and culture section, the prices of holidays with complex services were higher in October, by 11.6 percent. The prices of catering services rose by almost nine percent year-on-year, and the prices of accommodation by 12.2 percent. Discounts in the transport section contributed to the year-on-year decrease in the price level in October. Car prices fell by 4.3 percent and fuel and oil prices by 7.3 percent.
Month-on-month, consumer prices rose by 0.1 percent in October. The prices of goods in total remained at the September level, services rose in price by 0.2 percent.
Analysts: January will be key
“The slight month-on-month increase in inflation and the year-on-year slowdown in the price growth of the vast majority of items in the consumption basket indicate that inflation is still on the decline after excluding extraordinary effects,” said UniCredit Bank analyst Patrik Rožumberský. According to him, inflation will probably go down again in November. “Actual inflation adjusted for statistical noise fell to 5.8 percent and remains on a downward trajectory,” added ČSOB analyst Dominik Rusinko.
“The October increase in year-on-year inflation is not a surprise and certainly does not mean any drama. The increase in inflation was driven almost exclusively by electricity prices, and year-on-year inflation should return to seven percent already in November,” Generali Investments analyst Radomír Jáč said. According to him, a significant slowdown in year-on-year growth in consumer prices will follow at the beginning of 2024, mainly thanks to the development of household energy and food prices.
The increase in year-on-year inflation is the result of last year’s consideration of the “savings energy tariff. It’s actually just a numbers game consisting of a temporary reduction of the comparative base last October, added Banka Creditas analyst Petr Dufek. This effect will disappear at the beginning of next year, when, of course, the real unknown will come into play, namely new price lists for goods and services, he pointed out.
It will be crucial whether the re-acceleration of inflation is reflected in inflation expectations, or whether households and companies understand the “technical” nature of the temporary acceleration of inflation at the end of the year, pointed out Deloitte analyst David Marek. According to him, the key moment for the further development of inflation will be the January revaluation of goods and services. This will determine how quickly the Czech economy can return to low and stable inflation.
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