The CNB comments on the December 2006 inflation figures
Inflation comes in below the CNB's October forecast for 2006 Q4 as a whole
According to figures released today, annual inflation increased slightly to 1.7% in December
from 1.5% in November. The gradual return to the CNB's target of 3% thus continued.
In month-on-month terms, the price level increased by 0.2% in December. Growth was recorded
particularly for food prices, which failed to follow their surprisingly subdued trend of the
previous two months. Clothing and footwear prices rose as well; their long-running year-on-year
decline is gradually easing. Modest upward price movements were also seen in hotel and restaurant
services and in the recreation and culture category. By contrast, there were decreases in fuel
prices, reflecting oil price developments on world markets, and in prices of alcoholic
beverages.
As expected, the December outturn further emphasised the deviation of inflation from the CNB's
current forecast prepared in October 2006. Throughout 2006 Q4, inflation was more moderate compared
to the forecast, ending the year 0.7-0.8 percentage point below the forecast in year-on-year terms.
This significant deviation was due to a combination of several factors. Prices of tobacco products
have yet to reflect the impact of the changes made to excise duties in April 2006; this impact has
probably moved to the first few months of this year. Despite picking up somewhat in December 2006,
annual food price inflation was also much lower than forecasted. These two factors account for
almost two-thirds of the deviation of actual inflation from the forecast. The remainder is due in
roughly equal measure to fuel prices, which are falling due to the unexpectedly strong decline in
oil prices on world markets, and to adjusted inflation excluding fuels. The latter saw a modest
pick-up in annual terms towards the end of 2006 as predicted in the forecast, but still remained
below the 1% level. This confirms that the current pressures on inflation from the real economy are
moderate and are moreover being offset by the strengthening exchange rate of the koruna.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the December 2006 inflation figures
Inflation comes in below the CNB's October forecast for 2006 Q4 as a whole
According to figures released today, annual inflation increased slightly to 1.7% in December from 1.5% in November. The gradual return to the CNB's target of 3% thus continued.
In month-on-month terms, the price level increased by 0.2% in December. Growth was recorded particularly for food prices, which failed to follow their surprisingly subdued trend of the previous two months. Clothing and footwear prices rose as well; their long-running year-on-year decline is gradually easing. Modest upward price movements were also seen in hotel and restaurant services and in the recreation and culture category. By contrast, there were decreases in fuel prices, reflecting oil price developments on world markets, and in prices of alcoholic beverages.
As expected, the December outturn further emphasised the deviation of inflation from the CNB's current forecast prepared in October 2006. Throughout 2006 Q4, inflation was more moderate compared to the forecast, ending the year 0.7-0.8 percentage point below the forecast in year-on-year terms. This significant deviation was due to a combination of several factors. Prices of tobacco products have yet to reflect the impact of the changes made to excise duties in April 2006; this impact has probably moved to the first few months of this year. Despite picking up somewhat in December 2006, annual food price inflation was also much lower than forecasted. These two factors account for almost two-thirds of the deviation of actual inflation from the forecast. The remainder is due in roughly equal measure to fuel prices, which are falling due to the unexpectedly strong decline in oil prices on world markets, and to adjusted inflation excluding fuels. The latter saw a modest pick-up in annual terms towards the end of 2006 as predicted in the forecast, but still remained below the 1% level. This confirms that the current pressures on inflation from the real economy are moderate and are moreover being offset by the strengthening exchange rate of the koruna.
Tomáš Holub, Executive Director, Monetary and Statistics Department