Czech inflation held steady at 2.1% in May

Czech consumer prices rose by 2.1% year-over-year and 0.1% month-over-month in May, as confirmed by the Czech Statistical Office (CZSO) in its flash estimate released earlier this month.

This marks a further slowdown in inflation compared to April, when the inflation rate stood at 2.5%. The main driver behind this was falling prices for food and non-alcoholic beverages.

“As in April, this growth was slowed by food prices. These continued to fall year-over-year, partly due to the higher base from the previous year, and were about 2% cheaper compared to May of the previous year,” explained Pavla Šedivá of the CZSO.

In the food sector, prices for cheese, oils and fats, and non-alcoholic beverages, among other items, declined. Butter and potatoes, in particular, became significantly cheaper compared to the previous year.

By contrast, the transportation sector continued to have the greatest impact on overall inflation. Prices for fuels and lubricants for passenger cars were 26.3% higher than the previous year’s level. Prices in the housing, water, electricity, gas, and other fuels sectors also continued to drive up prices. Overall, goods prices rose by 0.6%, while service prices increased by 4.7%.

Analysts surveyed by the Czech news agency CTK viewed the trend as generally positive. They noted that higher fuel prices had not yet impacted food prices. At the same time, however, they warned of potential consequences of ongoing tensions in the Middle East.

“The longer the current conflict in the Middle East persists, the more likely it is that prices for goods will rise more rapidly, particularly due to higher import prices, more expensive intermediate goods, and increased logistical costs,” CTK quoted Miroslav Novák, chief analyst at the consulting firm Citfin, as saying. He expects inflation to reach around 3% by the end of the year.

By European standards, the Czech Republic fared well in May. Among other countries, the inflation rate was lower than that of Germany (2.6%), Poland (3.1%), Austria (3.7%), and Slovakia (3.9%). According to CTK, the Czech Republic thus recorded the lowest inflation among the 41 European countries monitored by the investment platform Port.