Czech trade numbers show surprise deficit of 600 mln crowns in August

Oct 8, 2007 - The Czech Republic showed a deficit on foreign trade of 600 mln crowns in August, surprising on analysts' consensus expectations of a 1 bln crown surplus, data today showed.

But data released by the Czech statistical office (CSU) showed that year-on-year, the deficit shrank by 500 mln crowns, and the numbers left intact expectations that the former communist country's trade surplus will double overall this year.

The Czech Republic's currency the crown, which hit fresh all-time highs on Sept 17 at 27.385, was unmoved by the data.

"It was a (negative) surprise although not a big surprise," said Jan Vejmelek, an analyst with Komercni Banka. He expects the full year 2007 trade balance to end in a 59 bln crown surplus, up from a surplus of 39.8 bln crowns in 2006.

Trade balances in other central European former communist economies have worsened in recent quarters as strong currencies have hurt their exporters, whilst imports have increased on the back of booming domestic demand. But the Czech Republic continues to be supported by multinational investments, which use low local wages and costs to produce cheaply and export to elsewhere in the enlarged European Union.

The statistical office also said that the August trade balance was hit by a 1.4 bln crown drop in the surplus on trade in cars and machinery, where local Volkswagen and Peugeot factories remain a key net exporter.

Exports grew 12.1 pct annually, the slowest growth rate since September 2006. Imports rose just a touch slower, by 11.7 pct.

David Navratil from Ceska Sporitelna said the trade balance from the previous 12 months was at a surplus of 68 bln crowns and for the whole year of 2007 he expects it to reach 70 bln crowns.

Czech Sept CPI up 2.8 pct yr-on-yr, in line with expectations

Oct 8, 2007 - Czech inflation accelerated to the fastest in 13 months in September, closing in on the central bank's target and suggesting interest rates may rise again as early as this month.

Consumer prices rose an annual 2.8 percent, up from a 2.4 percent in August, the Prague-based statistics office said on its Web site, matching the median estimate by 13 economists surveyed by Bloomberg. Consumer prices fell a monthly 0.3 percent, at half the pace from September 2006, the office said.

The central bank has been lifting the European Union's lowest rates for two years on concern the consumption-driven expansion will foster price growth. Policy makers target inflation one point either side of 3 percent and have signaled borrowing costs will have to rise further because consumer-price increases are forecast to exceed 4 percent next year.

"Inflation confirms the central bank's assumption that a stagnation of prices during the summer months was just a temporary factor," said Patrik Rozumbersky, the chief economist at Zivnostenska Banka AS, who sees a rate increase this month. "The basic effect and steep growth of some food prices in the rest of the year will push inflation markedly above 3 percent."

Koruna Advances

The koruna was trading at 27.49 per euro by 5:03 p.m. in Prague, compared with 27.550 on Oct. 5. The ask yield on the government bond due 2016 rose 1 basis point to 4.304 percent. The price fell 0.1, or 10 koruna per 10,000 koruna ($511) face amount, to 118.100, according to Komercni Banka AS prices. A basis point is 0.01 percentage point.

September's inflation compared with the central bank's forecast of 2.9 percent, pushed lower by core inflation, Tomas Holub, the head of the central bank's monetary and statistical department, said on the central bank's Web site.

Food, cigarettes and fuel prices for automobiles were higher than predicted in the July forecast, he added.

The central bank foresees annual price growth of as high as 4.5 percent next year, driven by higher indirect taxes and regulated prices.

The mid-point peak of the so-called monetary-policy inflation, which excludes the effect of one-time changes in indirect taxes that the central bank omits, is projected to jump to 3.7 percent in 2008 from about 1.8 percent in September.

Central bankers raised the key two-week repurchase rate in May, July and August, bringing it to 3.25 percent, still below the European Central Bank's 4 percent.

Seasonal Declines

The monthly price growth was driven by a seasonal drop of costs of travel packages, which were on average 16.1 percent lower last month than in August, the statistics office said.

That decline, which was less than usual due to new methodology for data collection that makes the data less volatile, caused prices to be 0.2 percent higher than a year ago, the office said.

In the month, transportation costs were lower, with motor fuels shedding 0.9 percent, while regulated rents added 1.3 percent. Education prices increased 1.8 percent in month, followed by a 0.9 percent growth of clothing and shoes prices while food got only 0.1 percent more expensive last month.

Adjusted inflation, excluding food and motor fuels, which measures inflationary pressures of domestic demand, jumped to 1.1 percent in September from 0.6 percent, according to calculations of Jiri Skop, an economist at Komercni Banka AS in Prague.

Rate Increase

Economists are split on whether the central bank will come up with another rate increase this year or wait until 2008 to bring the repo rate higher. While Skop predicts the benchmark rate to be lifted twice this year and two more times in 2008, others say the bankers may refrain from any action this year.

Interest-rate futures show investors have scaled back expectations of rate increases, reflecting the stronger-than- projected koruna and a reduced outlook for lending rates abroad.

The forward-rate agreement used to gauge bets for the six- month Prague Interbank offered rate beginning six months from now, traded at 3.79 percent, down 23 basis points over the past two months.

"A pickup of inflation is triggered by food, gasoline, cigarettes and other cost factors, still not by demand," said David Navratil, an economist at Ceska Sporitelna AS in Prague. "With the koruna stronger than anticipated by the central bank, a hawkish argumentation gets one blow after another."

Czech Current Account Deficit Shrinks In July

Sep 12, 2007 - The Czech Republic's current account deficit contracted to CZK8.79 billion in July from CZK12.87 billion in June, the Czech Central Bank said Wednesday. The official data showed that the decrease is mainly due to estimated reinvested direct investment earnings. The current account deficit came in well below the market forecast of CZK19.50 billion for July.

In July, net inflow of direct investment came in at CZK22 billion, of which estimated reinvested earnings were around CZK10.4 billion.

The official data showed that the net outflow of portfolio investment of CZK11.4 billion was mainly affected by a deficit in equity securities transactions. The annual net inflow of foreign direct investment and total annual net portfolio investment outflow continues to grow slightly in recent months.

At the same time, other investment showed a deficit of CZK6.3 billion, owing to changes in international short-term positions of monetary financial institutions.

Czech CPI Annual Inflation Edges Up In August

Sep 10, 2007 - Czech consumer prices rose 2.4% on an annual basis in August, the statistical office said, Monday. This matched economists' consensus of 2.4% rise. Consumer prices grew 2.3% in July. Consumer prices advanced 0.3% on a monthly basis, in August compared to the rise of 0.4% in the previous month. Economists were looking for a rise of 0.2% in August.

On an annual basis, prices of alcoholic beverages and tobacco grew 1.2% in August, pushed by the 26.6% surge in prices of tobacco products. Prices of non-alcoholic beverages advanced 0.5%, compared to the rise of 0.4% in the previous month. Prices of clothing and footwear remained unchanged. Housing, water, electricity, gas and other fuels prices grew 0.9%, slightly more than the prices rise of 0.8% in the earlier month.

Transport prices declined 0.1% annually in August, the same as in the previous month. Communications prices slipped 0.1% after remaining unchanged in the earlier month. Prices in the recreation and culture sector eased 0.3% after sliding 0.1% in the previous month.

In August, prices of goods advanced 2.5% and prices of services grew 2.3%.

The inflation rate in the twelve months to August slowed to 2.0%, from 2.1% in the twelve months to July. The Harmonized Index of Consumer Prices, HICP, rose 2.6% annually in August, slightly more than the increase of 2.5% in July. On a monthly basis, the HICP rose 0.3% in August.

Though there was a moderate acceleration in inflation in August, yet it remained well within the Central Bank's target of 3%, and lower than their projection of a 2.6% rise, the Danske Bank said. With the Czech koruna strengthening, and inflation lower than expected, there might be a pause in the current phase of monetary tightening, the Danske Bank observed. However, further hikes at the end of the year could not be ruled out the, Danske Bank said.

The Harmonized CPI for EU purposes moved up 0.3% monthly in August. The HICP annual inflation rate edged up to 2.6% in August from the 2.5% seen in July.

Czech Q2 Economic Growth Slows Yet Beats Expectations

Sep 7, 2007 - The Czech economy posted an annual 6% growth in real terms in the second quarter, the statistics office said, Friday. This was slightly more than the 5.8% growth that economists were expecting and a little less than the 6.4% growth witnessed in the first quarter. The growth for the first quarter was revised up from 6.1% growth estimated initially.

The economy climbed a nominal 10% annually to CZK899.7 billion in the second quarter, while inflation was 4%.

Value added in manufacturing grew 10.5% annually in real terms in the second quarter, while the value added in the wholesale, retail and repair of motor vehicles sector jumped 14.2% and value addition in the real estate, renting and business activities sector climbed 11.3%.

Household final consumption expenditure at constant prices expanded 6.5% in the second quarter, pushed by higher expenditure outlays for motor vehicles, food, tobacco products, furniture and recreation. Gross fixed capital formation growth gained 4.2%, slowed down predominantly by investment in buildings and structures, which took up 41% of total fixed capital formation. Inventories witnessed increase in the second quarter, due to growth in inventories in manufacturing, power industry and construction sectors.

External trade in goods resulted in a nominal CZK 16.2 billion surplus. Export prices rose 1%, while import prices dropped 0.9%.

In sequential terms, the real GDP grew a seasonal and working day adjusted 1.4%, in the second quarter, compared to the growth of 1.5% in the previous quarter.

The EU27 and the euro area grew 2.8% and 2.5% in the second quarter, according to the Eurostat.

Czech July foreign trade deficit dwindles year on year

Sep 4, 2007 - The Czech foreign trade deficit for July was 0.7 bln crowns, due to the negative balance of trade with semi-manufactured goods and materials, data published by the Czech Statistical Office (CSU) showed today.

However it also showed that over the last twelve months, the foreign trade balance is in surplus.

It is the first monthly foreign trade deficit this year - though the July balance has regularly been in deficit since 1993, the CSU said.

Compared with July 2006 the deficit is 2.7 bln crowns smaller, thanks to a growing surplus in export of cars and machinery, which rose by 19.7 pct year-on-year, an increase of 2.1 bln crowns, the data showed.

The balance for the last twelve months reached a surplus of 67.1 bln crowns, up by 36.7 bln compared with the last twelve-month period, the data showed.

Overall exports grew 20.7 pct year-on-year and imports rose 18.7 pct. In a month-on-month comparison, exports grew 4.8 pct and imports rose 1.9 pct.

"The deficit is due to the growth in the price of oil as well as the seasonal deterioration that takes place during summer holidays," said David Navratil, an analyst at Ceska Sporitelna.

Czech state budget posts a surplus by end-Aug, compared with deficit last year

Sep 3, 2007 - The Czech Republic posted a budget surplus for the eight months to end-August, due to faster-than-expected inflow of income, the finance ministry said.

The January-August balance was in surplus by 22.23 bln crowns, compared with a 6.44 bln deficit last year.

Income for the year so far is 656.7 bln crowns, and state spending 634.4 bln crowns.

Czech govt sets 2008 public deficit target at 2.95 pct of GDP

Sep 3, 2007 - The 2008 proposal of the Czech state budget sets the public budget deficit target below 3 pct, and proposes gradual cuts to the deficit to 2010, the finance ministry said today.

In 2008 the deficit should reach 2.95 pct of gross domestic product (GDP), while in 2009 it should fall to 2.6 pct and in 2010 it should be at 2.3 pct, the ministry said.

The income of the 2008 state budget should reach 1,036.5 bln crowns, which is a 9.2 pct rise compared with 2007.

The budget expenditures are proposed at 1,107.3 bln crowns in 2008, up by 6.4 pct year on year.

The state debt is expected to reach 990.1 bln crowns at the end of 2008 or 26.1 pct of GDP, compared with 905.3 bln crowns, or 25.7 pct of GDP, expected in 2007.

Czech central bank raises key interest rate by 25 basis points to 3.25 pct

Aug 30, 2007 - The Czech central bank (CNB) raised its main interest rate today by 25 basis points to 3.25 pct as it continues a rate tightening campaign aimed at cooling consumer spending and putting the brakes on inflation.

The market was split over whether the central bank would hike the main rate today but a tight majority expected it to take a breather after two rises in interest rates so far this year that had brought the main borrowing rate to 3 pct.

July inflation stood at 2.3 pct, below market forecasts as well as below central bank's projection of 2.5 pct.

The bank targets inflation at 3 pct with a tolerance band of 1 pct either side of the target.

Most analysts had expected borrowing costs in the Czech Republic to rise once more this year but saw the hike between September and November.