Central European Daily

The Czech koruna was supported by better than expected data yesterday that included GDP revision, industrial production and especially higher-than-expected inflation. The koruna gained 0.2% immediately and held its gains till the end of the session. However, the Czech National Bank governor Singer said that it is too early to judge the effect of November’s interventions and that January’s and February’s figures will be crucial. Yesterday’s inflation readings pose upside risk to our inflation forecast that inflation will fall below zero in January; now it is possible that it might remain in a positive territory is spite of falling energy prices. Another unexpectedly good reading came today, when retail sales four times exceeded consensus as it rose by 6.1% in November. Although we have supposed that the interventions can support consumers demand due to households’ fear of prices rise, we have not expected such a robust reaction. This number seems to prove CNB’s claim that the threat of higher prices would push people to spend more; however the key question remains unanswered – whether this effect might persist or if it was only a temporal one (before Christmas).