Czech annual inflation eased to 2.3% in September, coming in 0.3ppt below market and Czech National Bank expectations. The main drag was a pronounced decline in food prices. Given the limited breakdown of the preliminary estimate, we also see some potential for weaker regulated prices, mainly through lower energy components. Annual price growth in the service segment remained unchanged at 4.7% in September, while price dynamics in the goods segment eased to 0.8% in September from 1.1% previously. We estimate that core inflation likely softened marginally to some 2.7%, coming in 0.1ppt below the CNB’s summer forecast.
The thing is that food prices at this time of the year are heavily affected by the crop season, which can put downward pressure on price tags, especially when it comes to unprocessed foodstuffs such as vegetables and fruits. This was also the case in the latest CPI preliminary estimate, when the annual price dynamics for unprocessed food eased noticeably to 3.4% in September from 7.8% previously, declining 2.1% on a monthly basis. The agricultural producer’s data provides a decent indication of what is going on in the food sector, with crop product prices decreasing since May, while prices of animal production continued to gain over the same period. As a result, crop products added only 4.6% annually in August, while annual growth in prices of animal products crept up to 18.9% in the same month, a record pace observed since April 2023.