Czech Retail Sales January 2008

Czech retail sales grew at the slowest annual rate in four months in January as accelerating inflation curbed shoppers' purchasing power, supporting speculation that interest-rate increases may not continue. Sales rose 4.1 percent, compared with an annual increase of 5.4 percent in December, the Czech Statistical Office said today.




Retail sales, excluding cars and motor fuels, were up by 3.3 percent and were 4.9 percent higher when seasonally adjusted, led by clothing, furniture and electronics. Sales of cars and motor fuels grew 6 percent.

Consumer spending has eased back as inflation accelerated to 7.5 percent in January from 1.3 percent a year earlier. The central bank expects cooling household spending, the main driver of economic growth in the past two years, to restrain the Czech expansion back to a 4.1 percent GDP growth in 2008 from 6.5 percent 2007. If today's data give them some encouragement to believe they are succeeding then they may well leave the main interest rate at its current 3.75 percent. Certainly with an average inflation rate this year of over 6 percent and nominal wage increases of around 8 percent, real salaries may well increase by less than 2 percent following the 4.4 percent increase in real wages in 2007. So this would definitely be a move in the right direction if it can be sustained.

The koruna fell to 25.208 per euro by 10:47 a.m. in Prague, compared with 25.141 yesterday. The ask yield on the government benchmark bond maturing in 2018 rose 5 basis points to 4.59 percent.