Development of external trade price indices - 2. quarter of 2005

Month-on-month evaluation:

External trade price development in the second quarter of 2005 was influenced by several factors. The factors increasing prices were: depreciation of Czech koruna (CZK) to main foreign currencies and price increase of mineral fuels, petroleum in particular, on world markets. On the contrary, growth of external prices of metalliferous ores slowed down markedly. What is of importance is relationship of external trade price indices to exchange rate of CZK to main foreign currencies, as it is clear from the graphs below.


The m-o-m exchange rate index included the two most important currencies from the point of view of Czech external trade, i.e. EUR and USD, and m-o-m indices of CZK exchange rates to these currencies were weighted with the weight pertaining to these foreign currencies in import price index. Correlation of this total m-o-m import exchange rate index and m-o-m index of import prices for the last twelve months was 0.87. What was also important was influence of petroleum prices (measured by average monthly Brent petroleum price) on import prices; the correlation coefficient of m-o-m indices of these two variables for the last twelve months was 0.56.

Similar relationships are valid for export price index, too:

The correlation coefficient between the export price index and two most important currencies (again weighted by the weight, which pertains to those foreign currencies in the export price index) was in the above-mentioned period 0.75. Between the petroleum Brent price on world markets and export price index (with regards to some delay due to technology and to some extent different price development of petroleum and petroleum products) the value of this coefficient was 0.40.

Import prices, in relation to the above-mentioned inflation influences, increased in total in the second quarter of 2005 by +0.9% m-o-m in average, i.e. by 0.9 percentage point more than in the first quarter. The biggest price increase was in 'mineral fuels, lubricants and related materials' (+6.2%, 'petroleum, petroleum products and related materials' in particular as well as natural gas in relation to the price development on world markets). Compared to the previous quarter, it was growth by +3.3 percentage points. Depreciation of CZK had an influence on the price increase in 'machinery and transport equipment' (+0.3%, i.e. growth by +0.8 percentage point, mainly machinery specialized for particular industries). On the other hand, what is behind the slowdown of price growth of 'crude materials, inedible, except fuels' by 0.4 percentage point is especially price development of metals on world markets and related to that also development of import prices of metalliferous ores.

Export prices did not change in total in average m-o-m in the second quarter of 2005, which translates into growth by +0.2 percentage point after a decrease in the first quarter. Similarly as for import prices, the biggest price increase occurred in 'mineral fuels, lubricants and related materials' (+2.9%, i.e. by 0.2 percentage point more than in the previous quarter, mainly natural gas and petroleum products). In relation to CZK depreciation, prices of 'machinery and transport equipment' increased (+0.2%, i.e. by +0.6 percentage point, especially metalworking machinery). On the other hand, especially in relation to development of prices of metals, prices of 'crude materials, inedible, except fuels' and 'manufactured goods classified chiefly by material' decreased (-0.5% and –0.4%, respectively).

Terms of trade reached in the second quarter of 2005 the negative value of 99.1%, i.e. by 0.7 percentage point less than in the first quarter of 2005. In comparison with the first quarter of 2005, the terms of trade value decreased in the second quarter of 2005 in the following sections: 'mineral fuels, lubricants and related materials' (96.9%, i.e. a decrease by 2.9 percentage points), 'chemicals and related products' (98.9%, i.e. a decrease by 1.2 percentage point) and 'machinery and transport equipment' (99.9%, i.e. a decrease by 0.2 percentage point). Positive value of terms of trade was in the section of 'miscellaneous manufactured articles' (100.7%, which is, however, at the same time a decrease by 0.4 percentage point) and 'food and live animals' (100.6%, i.e. an increase by 1.2 percentage point).


Year-on-year evaluation:

In the second quarter, several prevailing influences occurred in the y-o-y external trade price development: appreciation of CZK to main foreign currencies (although smaller than in the first quarter) on one hand and increasing prices of mineral fuels on world markets on the other hand. Prices of metals further slowed down their growth. With regards to a longer time horizon, these influences were more distinctive in the y-o-y development than in the m-o-m development. A marked increase of petroleum and natural gas prices on world markets was reflected in a considerable increase of external trade prices in 'mineral fuels, lubricants and related materials' (over 20%).


The relationship of import prices and CZK exchange rate to main foreign currencies is distinctive also in the year-on-year development. The correlation of this total y-o-y import exchange rate index and the y-o-y import price index for the last twelve months was considerable – the correlation coefficient reached the value of 0.98.


A relationship of similar strength was observable also at export prices. The correlation coefficient was 0.84.

Import prices increased in total in the second quarter of 2005 by +0.2% and after a decrease in the first quarter thus increased by +1.4 percentage point. The main cause of this development was lower appreciation of CZK to EUR and USD and at the same time higher growth of prices in 'mineral fuels, lubricants and related materials' in comparison with the first quarter. Prices of 'mineral fuels, lubricants and related materials' in harmony with development on world markets increased by +26.2% (i.e. by 7.6 percentage points more than in the first quarter, especially natural gas, petroleum and petroleum products). Slowdown of y-o-y price growth of metals on world markets led to lower price growth of 'crude materials, inedible, except fuels' (growth by +1.7%, but at the same time a decrease by 1.3 percentage point, metalliferous ores in particular) and stagnation of prices of 'manufactured goods classified chiefly by material' (i.e. a decrease by 0.4 percentage point, iron and steel in particular). Lower appreciation of CZK in the second quarter in comparison to the first quarter was the main cause of the price development in the section of 'machinery and transport equipment' – a decrease by 4.4% but at the same time growth by +1.4 percentage point).

Export prices decreased in total in the second quarter of 2005 by -0.7% (decrease by 0.8 percentage point) and thus they did not grow for the first time since the first quarter of 2003. It was the effect of similar influences as for the import prices, i.e. growth of prices of petroleum and natural gas on world markets (price increase of 'mineral fuels, lubricants and related materials' by +22.2%, i.e. by 1.3 percentage point, mainly coal, petroleum products and natural gas) and lower appreciation of CZK to main foreign currencies (decrease of prices of 'machinery and transport equipment' by 4.5% but at the same time growth by 1.1 percentage point). In comparison with import prices, however, what was of much bigger influence for export prices was a decrease of price growth of metals on world markets. Prices of 'manufactured goods classified chiefly by material' thus increased only by 0.9% (i.e. decrease by 6.0 percentage points, mainly iron and steel, manufactures of metals and non-ferrous metals) and prices of 'crude materials, inedible, except fuels' decreased by –2.6% (mainly metalliferous ores).

Terms of trade reached in the second quarter of 2005 the negative value of 99.1% y-o-y (the first negative value of quarterly y-o-y terms of trade since the price revision in 2001) and in comparison with the first quarter they thus decreased y-o-y by 2.2 percentage points. The terms of trade value was low especially in the section of 'crude materials, inedible, except fuels' (95.8%), 'mineral fuels, lubricants and related materials' (96.8%) and 'food and live animals' (97.2%). The terms of trade value of 'machinery and transport equipment' reached 99.9% and in comparison with the first quarter thus decreased by 0.3 percentage point. Positive value of terms of trade was especially in 'chemicals and related products' (106.7%) and 'miscellaneous manufactured articles' (105.1%).


Elaborated by: Prices Statistics Department
Director: Jiří Mrázek, phone number (+420) 27405 2533