Inflation slightly drops but food prices remain high

The year-on-year growth of consumer prices in Czechia decelerated to 2.9% in May, which was 0.3 percentages points down on April. It was driven mostly by rising food prices.

Food and non-alcoholic beverages prices rose by 6.3%, with fruit (+25.4%), pork (+13.7%) and vegetables (+4.0%) costlier, and butter (-7.7%) cheaper. This is due to a combination of factors - ranging from drought to harvest problems in southern European countries affected by the pandemic.

The overall inflation rate was also impacted by rising prices of housing. People paid 8.0% more for electricity and 3.8% more for rent. On the other hand, petrol stations in Czechia are charging 21.7% less than last May.

Inflation is still over the target level of 2% set by the Czech National Bank and is currently the highest in the European Union. According to the analysts, May's data suggest that consumer prices should decelerate more in the second half of the year. This will be due to the effects of the coronavirus pandemic - specifically, lower demand, slower wage growth, and limited economic activity.