Consumer inflation in August picked up slightly amid solid retail sales growth in July

Consumer Prices in August: +0.3% m/m | +1.9% y/y

Consumer inflation maintained its upward momentum in August due to higher fuel prices, though their impact continues to be offset by lower food prices and likely more moderate monthly growth in core inflation. According to a preliminary estimate by the Czech Statistical Office (CZSO), year-over-year consumer price growth in August 2026 accelerated to 1.9% from 1.7% in July. This result is in line with analysts’ consensus and the CNB’s forecast. On a month-over-month basis, consumer prices rose by 0.3% in August, which was in line with the typical increase over the past five years. This primarily reflects a stronger-than-usual rise in fuel prices (similar to last month), while food prices had the opposite effect.

According to my preliminary estimate, core inflation likely slowed its year-over-year growth to 2.9% from 3% in July (again, slightly above the CNB’s forecast). If this is correct, then the seasonally adjusted month-over-month growth in core inflation would have slowed to 0.15% in August from an average increase of 0.25% over the previous three months (the current three-month annualized average is 2.4%). August’s month-over-month growth in core inflation alone would imply a slower annualized growth rate of core inflation at 1.8%, down from 3.1% in the previous three months, which is below the midpoint of the CNB’s inflation target and below its forecast of 2.4% year-over-year core inflation for the third quarter of 2027.

If this materializes, including a slowdown in the pace of core services inflation, it would dampen hawkish sentiment at the CNB and in the market. The market expects an interest rate hike of more than 0.75 percentage points over the next six months. Hawkish sentiment is also tempered by milder year-over-year wage growth, which, due to a revision, fell below the CNB’s expectations, although the quarter-over-quarter pace of wage and salary growth, together with planned pay increases in the public sector, continues to pose inflationary risks. See report: However, slower wage growth maintained strong momentum in the second quarter as well.

August’s inflation data are dampening the risks posed by higher oil prices to the CBA’s forecast, which anticipates consumer inflation accelerating to 2.6% next year after this year’s 2%. The preliminary figures also point to a risk of slower core inflation growth than the 2.7% expected by the Czech Bank Association (CBA) next year, following this year’s 2.9%. The Czech Statistical Office (CZSO) will release final data on August inflation on September 10, when the Czech National Bank (CNB) will announce its core inflation estimate at 1:00 p.m. CET. So we’ll see what role the adjustment to imputed rent played in the more moderate pace of service price growth (following July’s spike due to the spring spike in material prices) and to what extent the slowdown in core service prices continued (although I haven’t observed this yet in the labor-intensive services segment).

July retail sales excluding autos: +0.6% m/m | +4.9% y/y

The July retail figures confirm the view that the decline in planned major purchases by households should not jeopardize solid retail sales growth. This was accompanied by a modest recovery in services output. July retail sales returned to stronger figures, with 0.5% month-over-month growth after seasonal adjustment, 0.6% excluding autos, and 0.7% for core retail sales excluding autos, food, and fuel. Year-over-year growth thus accelerated to 4.9% (excluding the automotive segment) from June’s 3.6%, and to nearly 7% for core retail sales.

August figures are likely to remain solid, with 4.4% year-over-year growth excluding autos and still nearly 7% in core retail sales. Annualized growth in retail sales has remained strong over the past three months, at just over 7% in both segments. However, core retail sales need to post strong month-over-month growth to lift quarter-over-quarter growth in the third quarter to well above 1%, following nearly 2% growth in the first half of the year. This could support private consumption, which was somewhat disappointing in the first half of the year (0.5% quarter-over-quarter in the second half). See report: Weaker consumer spending, business investment, and productivity hindered a stronger economic recovery.

Consumer inflation in August picked up slightly ...

... which reflects higher fuel prices. However, the outlook does not factor in continued negative contributions from energy and food prices

The preliminary look at core inflation appears favorable ...

... even with continued strong, albeit somewhat slower, growth in service prices

Inflation in August maintained its upward momentum due to higher fuel prices, which continue to offset lower food prices and likely more moderate monthly growth in core inflation.

Momentum in retail remains strong, exceeding year-over-year growth

In retail as well as in the service sector, a strong, ongoing trend is evident

July Retail Sales Figures