In October, consumer prices in the Czech Republic witnessed a notable year-on-year increase of 8.5 percent, marking a significant 1.6 percentage points higher than the preceding month of September. This uptick is attributed to changes in the electricity tariff introduced in October of the previous year, which initially led to lowered prices but was subsequently abolished.

The acceleration in price growth to 8.5 percent in October is primarily linked to the impact of last year’s austerity tariff on electricity prices. Pavla Šedivá, the head of the consumer price statistics department at the Czech Statistical Office, highlighted that if the austerity tariff is excluded from the calculation, the price increase would have been 5.8 percent.

The Czech National Bank also acknowledged the influence of the austerity tariff, noting that its introduction in October of the previous year resulted in a notable decline in the price of the consumer basket compared to the previous month – the most significant drop in Czech history. This was followed by a record increase in January after the austerity tariff was discontinued, causing the mathematical October year-on-year inflation to shift to a higher level.

Contributing to the year-on-year increase in the price level for October were rising costs in rent and food. Rents in the housing sector saw an increase of 7.9 percent, making it the most impactful factor. The second most influential sector was food and non-alcoholic beverages, experiencing a price hike of 3.7 percent.

Petr Dufek, an economist at Credit Bank, highlighted that consumers are facing increased costs across various sectors, including energy, rent, food in restaurants, accommodation in hotels, clothing and footwear, and health. Notably, the only exception to this trend is the currently lower cost of motor fuels.

While a substantial fall in inflation is anticipated at the beginning of the next year, the specific trajectory remains speculative, ranging from a four to a two percent decline. Factors influencing this shift include new price lists for goods and ongoing discussions regarding energy and associated fees. Dufek added that a decline in inflation might be observed even before the Christmas holidays, citing favorable cost conditions for manufacturers and a prolonged period of weak demand, resulting in warehouses stocked with unsold goods.

Article by Prague Forum