Development of consumer price indices - 1. quarter of 2007

Consumer prices increased in Q1 2007 by 1.4% compared with Q4 2006. This increase came especially from a 5.1% growth of regulated prices while market prices rose by 0.7 %.

The growth of regulated prices was attributed predominantly to a 5.9 % price increase of tobacco products caused by the delayed effect of the excise tax increase in April 2006 followed by additional increase in March 2007. In ‘housing, water, electricity and other fuels’ (hereinafter only ’housing’) the prices of electricity increased by 7.9 %, water supply by 6.6 % and sewerage collection by 5.5 %. Net rentals rose by 4.6 % of which in dwellings with regulated rentals (last adjusted in July 2002) by 8.2 %. In ‘recreation and culture’ TV license fees increased by 20.0 %. As a result of an amendment to the Act on Social Care Services the fees for social care rose by 11.1 %. A contrary effect on price development had a 4.2 % drop in natural gas prices.

The growth of market prices in ’food and non-alcoholic beverages’ was mainly due to the increase of seasonal prices of fruit and vegetables, incl. potatoes, by 9.5 % and 17.7 %, respectively. Prices of package holiday increased by 3.1 % due to the end of winter. The drop of market prices was mainly attributed to a 4.5% decrease of the price of fuel. In ‘closing and footwear’ the prices went down especially due sales of winter models. The insignificant decrease in prices of meat, eggs and tea was recorded.

In relation to individual divisions of consumer basket the significant upward trend was recorded for the division ‘alcoholic beverages and tobacco’, downward trend was shown in prices of transport.

The average m-o-m growth in Q1 2007 was 0,5 %.
Similarly as in the previous years consumer price development in Q1 2007 showed a significant m-o-m price growth in January which was, however, this year lower than a year earlier and in contrast to the previous year (when in February and March the price level was stabilized) further price increases were recorded in 2007.

Uneven breakdown of m-o-m consumer price development in Q1 2006 and in Q1 2007 resulted in a significant deceleration of y-o-y growth of consumer prices in January 2007 and its further acceleration in February and March. In average, consumer prices increased in Q1 2007 against Q1 2006 by 1.5 %, i.e. equally as in Q4 2006. Regulated prices increased by 4.9 % and market prices by 1.1 %.

Despite of equal y-o-y growth of price level in Q1 2007 and in Q4 2006, price level in some divisions of consumer basket was different. Acceleration of y-o-y growth was recorded mainly in prices of alcoholic beverages, tobacco and food and non-alcoholic beverages. Conversely, a slowdown was recorded in housing and health.

In alcoholic beverages and tobacco an increase of excise taxes of tobacco products was recorded for all months of Q1 which finally resulted in a 6.2 % price increase.

In food and non-alcoholic beverages especially bread and cereals recorded an accelerated y-o-y growth up to 11.5 % (from 10.6 % in Q4 2006). Prices of non-alcoholic beverages moved from a 2.2% decrease in Q4 and recorded an upward effect by 0:4 %. Prices in the division milk, cheese, eggs developed similarly. Prices of potatoes increased by 96:9 %. Lower than the last year were the prices of meat, oils and fats, fruit, however, their drop was moderate.

In the division recreation and culture the price growth owed especially to a 20.0% increase of TV licence fees. Prices of audio-visual and photographic equipment as well as PC continued to fall.

In housing, water, electricity and fuels the growth of prices markedly slowed down due to a 8.2% drop of natural gas prices. Prices of electricity and solid fuels increased by 7.9 % and 16.0 %, respectively. Net rentals increased by 4.6 %, water supply by 6.4 % and sewerage collection by 6.0 %. Housing prices ceased to be one of the fastest growing divisions of consumer basket and recorded the lowest y-o-y growth since Q4 2003. Yet, the most significant y-o-y contribution to consumer price increase (0.6 percentage point) was attributed to housing.

Prices of transport affected the prices of fuel which after their m-o-m drop in January and February recorded a 3.3% increase in March which offset their y-o-y drop to 4.4 % (from 7.7 % in Q4). Lower were also the prices of cars, motorcycles and bicycles. Prices of transport services increased by o 2.4 %.

As it is clear from the chart, y-o-y development of consumer prices of automotive fuel corresponded with world prices of Brent crude oil, import prices of mineral fuels, lubricants and related materials and prices of industrial producers of refined petroleum products. The drop of consumer prices in the CR was, in addition, affected by a favourable development of exchange rates of CZK to USD.
Lower than in Q1 2006 were prices in closing and footwear, furnishings, household equipment and routine maintenance of the house, however, their decrease decelerated in Q1 2006. Slight dropping of prices in clothing and footwear, household appliances as well as in equipment for the reception, recording and reproduction of sound and pictures, mobile telephones reflect competition pressures on the market with those products which were caused by the offer prevailing over the demand as well as by import of cheap goods from Asian countries. Moreover, as for electric appliances, their assortment is changing quickly due to technical progress connected with reduction of prices.

Price increase of goods in total decelerated to 0.5% (from 0.6% in Q4), price increase of services accelerated to 3.2% (from 3.0% in Q4).


Harmonized index of consumer prices in the EU27

According to preliminary data, the year-on-year increase in the average harmonized index of consumer prices (HICP) in the EU27 was 2.1% in January and the same in February 2007. Prices grew most in Hungary (by 8.4% and 9.0%) and in Latvia (by 7.1% and 7.2%). Among states with the lowest HICP value (from 0.8% to 1.4%) ranked in January and February Malta, Finland, the Netherlands, France. In the Czech Republic the y-o-y growth of HICP in January and February (1.4% and 1.7%) was also below the average compared with the EU27. According to the preliminary results, the y-o-y HICP increase accelerated in the CR in March to 2.1%. Growth of prices in Slovakia decelerated in January and February to 2.2% and 2.0% (3.7% in December). On the other hand, in Germany, it slightly accelerated to 1.8 and 1.9% (from 1.4% in December 2006).