Citi Forecasts Higher Czech Inflation in August on Surging Fuel Prices

Analysts at Citi forecast that headline inflation in the Czech Republic accelerated in August, primarily due to rising fuel prices. The bank projects an annual inflation rate of 1.9% for the month, up from the 1.7% recorded in July, according to a research note.

Inflation and Industrial Outlook

While the headline figure is expected to rise, Citi anticipates that core inflation, which excludes volatile items like energy and food, will moderate slightly to 2.9% year-over-year from 3.0% in the prior month. The bank's note suggests that persistent services inflation continues to be underpinned by solid wage growth and strong domestic demand.

On the industrial front, Citi expects calendar-adjusted industrial production to have slowed to 3.2% year-over-year in July, down from 4.0% in June. This slowdown is attributed to typical seasonal effects, including planned factory shutdowns in the automotive and related engineering sectors.

Regional Economic Pressures

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Citi's analysis points to similar inflationary pressures in neighboring Hungary, where consumer prices are forecast to have risen 1.4% year-over-year in August, also driven by a significant monthly jump in fuel costs. In Poland, the bank expects the Monetary Policy Council to maintain its reference rate at 3.75%, adopting a more cautious tone due to recent inflation data and rising long-term yields.

Looking at another emerging market, the report forecasts that South Africa’s second-quarter GDP contracted by approximately 0.3% quarter-over-quarter on a seasonally adjusted basis. The decline was attributed to broad-based weakness across key sectors:

• Wholesale trade: sank 4.2%
• Mining production: fell 2.8%
• Electricity production: fell 2.5%
• Manufacturing production: contracted 1.6%