Czech inflation likely to have accelerated in December on rise in restaurant prices

Czech inflation is being pushed up by increase in restaurant prices and fuel base effect. According to a Societe Generale research report, the price level is expected to have risen 0.3 percent in December, bringing headline inflation to 1.9 percent, just one tick lower than the Czech National Bank target. Inflation is underpinned by the steep growth of food prices from November, along with fuel price inflation induced by base effects, but also by the rising price of oil on the global market.

The introduction of the electronic sales reporting system was a catalyst for price rises in restaurants in December. Around 20 percent of businesses are estimated to have increased prices by 10 percent on average. This creates a push of 0.2 percent on core prices, stated Societe Generale. The core price index is expected to indicate 2 percent year-on-year growth in December.

Inflation is expected to ease slightly in January because of a decline in energy prices. Consumer gas prices are expected to fall 3 percent, whereas heating payments would only marginally fall and electricity prices are expected to have stayed the same. But the deceleration in regulated prices would just delay reaching the 2 percent target by one month as the estimates indicate that inflation would surpass the target in February, added Societe Generale. A high inflation reading is expected to enable the Czech National Bank to remove the FX floor in the second quarter of 2017.