Consumer prices rose by six percent in November compared to the same month last year. Year-on-year inflation it is thus 0.2 percentage points higher than in October. This was announced by the Czech Statistical Office. And if it weren’t forgiving VAT on energy, inflation would jump to seven percent.
Compared to October this year, consumer prices rose by 0.2% in November. The inflation rate expressed by the increase in the average consumer price index over the last 12 months compared to the average of the previous 12 months was 3.5% in November, while 3.2% in October.
“Transport prices had the biggest impact on year-on-year price growth. Prices of fuels and oils increased by 32.8%, prices of cars by 7.4%. For example, Natural 95 was sold at petrol stations in November for an average of about 37 crowns per liter, which was the highest value since October 2012, says Pavla Šedivá, head of the CZSO’s consumer price statistics department.
Butter of food prices increased significantly – by 26.8% year-on-year. The prices of clothing and footwear stopped by 12.9% year-on-year, the prices of tobacco products are by 12.3% higher than a year ago. Catering services are more expensive by 7.6%.
The so-called imputed rents (owner-occupied housing costs) increased by 14.3% (by 12.8% in October), mainly due to rising prices of building materials and new housing prices, and to a lesser extent rising construction work prices. “Products and services for routine maintenance and repairs of the apartment” rose by almost a tenth (9.9%).
Sharp increase in energy prices was not reflected in the November figures on inflation due to the temporary remission of value added tax: electricity prices, according to statistics, fell by 13.6% year on year, and natural gas prices by 9.2%.
Source: Czech Banking Association, Jakub Seidler, CZSO
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“It is more like a temporary calm of the wind before the approaching wind, which will come in January. The remission of VAT on electricity and natural gas had a significant effect on the development of consumer prices in November. This is a temporary intervention valid in November and December of this year. This measure removed one percentage point from November inflation. If VAT starts up again in January, it will also be reflected in inflation. Headline inflation at the beginning of next year could attack the bar by eight percent, “says David Marek, chief analyst at Deloitte.
“Starting in July this year, when inflation reached 3.4%, prices are rising faster and faster. The last time inflation was above six percent was in October 2008. At that time, the financial crisis began. The Czechia is traditionally a low-inflation economy, the current pace is rather a rarity in our country, “recalls Tomáš Volf from the Ciftin financial group.
“The recipe of the Czech National Bank, which raises rates to curb rising prices, is not working yet. Loans are becoming more expensive, which may not only undermine consumer demand as consumer and mortgage lending become unavailable, but will also delay the drawdown of operating and corporate lending. This will ultimately lead to a slowdown in the economy. So we live in a time when we have high inflation and high rates at the same time. This dangerous mix can be a real threat, “warns Volf.
“We expect the year-on-year inflation rate to rise to close to 7% at the beginning of next year. We do not expect a significant slowdown until the second half of next year, which will be helped by the expected improvement in the supply of components and materials. On average, inflation should be close to 5% next year. The risk is that the problems on the supply side will last longer, and then inflation can easily rise well above 7%, ”says economist Michal Brožka from Komerční banka.
“People tightened their belts as part of the pandemic. As a result, household savings have risen to record levels. Unfortunately, the belts will not be released. Giant inflation is gradually eliminating the purchasing power of the accumulated savings, “notes Štěpán Křeček, chief economist at BHS.
Petr Kučera
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