The CPI came out worse than our optimistic prediction, however, it was still below the market consensus. The y/y change declined to 4.6% y/y or –0.1% m/m. Food prices again played the key role, as they declined by 1.4% m/m on falling vegetable prices by 21.6% m/m. Fruit prices, on the other hand, rose. Another positive feature was the strong seasonal decline in clothing prices. Prices in healthcare rose by 3.1% m/m, which was much less than in July last year. Leisure time prices declined due to falling prices in cultural services. On the contrary, car fuel prices rose by 4.8% in July as expected, driving transportation prices higher.
VII-02 VI-02 VII-01
CPI m/m -0,1 -0,4 0,1
y/y 4,6 4,8 9,4
core inflation m/m 0,6 0,2 0,5
y/y 5,6 5,7 9,4
Although food prices again accounted for the bulk of the decrease, the decline in prices was more broad based, which is reflected in the decline of the core inflation to 5.6% y/y from 5,7% y/y in June. The positive reaction of the market will probable remain limited, as the fast growing wages and household consumption pose risks for future development of inflation.
Jakub Dvorak, Investment Research, CSOB