Czech Republic strong expansion should translate into accelerating inflation

The strengthening economic performance of Czech Republic has been accompanied by a gradual rise in prices. Consumer price inflation has been surpassing both market expectations and those of the Czech National Bank. 

According to Societe Generale's estimation, "In June, price growth should again accelerate and month on month inflation reached 0.3% (SWDA), due to a pickup in core prices and mainly in fuel and food prices (based on the Czech Statistical Office's surveys). Year-on-year inflation should thus reach 1.0%, which would mark a significant difference versus the CNB's staff forecast (0.4% for June)."

The tightening in the labour market was evident even in April's employment figures in the industrial sector, which saw a second consecutive increase in employment by 3.3% yoy.

"The share of unemployed should register a 0.3pp drop in June toward 6.1%, which would be the lowest level in the past six years. There were not only favourable seasonal effects in June, but we look for a drop in the underlying seasonally adjusted rate of unemployment (by 0.11pp toward 6.49%)", estimates SocGen.