The Consumer Price Index increased by 0.2% in December and it is currently higher by 1.7% compared with last year. December's inflation numbers came with a surprise in the way of higher food prices. The adjusted numbers for inflation (excluding fuel), which are closely followed by the Czech National Bank, still remain very low and present only a very small likelihood of an interest rate hike this month. Given the current strength in the koruna, the April date for a hike in interest rates has to be considered.
The number of people registered as looking for work with the Labor Offices in December increased by 15,972 to 448,545. The unemployment rate moved up to 7.7% from 7.28% in November. December is usually burdened with negative seasonality factors. After adjusting for these seasonal factors, the unemployment rate, according to our calculations, moved down from 7.53% to 7.48% and it is 1.18 pp lower now than at the end of last year (2005).
Foreign trade in November confirmed its good shape of the last few months. Exports increased by 16.1% y/y while imports were up by only 14.2% y/y. The surplus in the balance of trade increased to CZK 6.4bn from CZK 4.4bn in October. The foreign trade balance was positively influenced by the decline in oil prices. The focus of Czech industry and foreign trade remains machinery and vehicle production.
The trade balance for the whole year of 2006 is heading towards CZK 50bn. In 2005, the surplus reached CZK 38.6bn.