Czech inflation fell from 2.7% to 2.5% yoy in August. This was in line with the consensus and only slightly above our estimate of 2.4%, due to higher food and core inflation. By contrast, the central bank had expected inflation to come in at 2.7% yoy in August. Therefore, given that inflation in July was already 0.1pp lower than the CNB had estimated, this meant the negative gap to its forecast was wider. From a mom perspective, the 0.1% increase in consumer prices in August was rather weak compared to what we usually see in this month.

Czech inflation fell from 2.7% to 2.5% yoy in August. This was in line with the consensus and only slightly above our estimate of 2.4%, due to higher food and core inflation. By contrast, the central bank had expected inflation to come in at 2.7% yoy in August. Therefore, given that inflation in July was already 0.1pp lower than the CNB had estimated, this meant the negative gap to its forecast was wider. From a mom perspective, the 0.1% increase in consumer prices in August was rather weak compared to what we usually see in this month.

Food price momentum remained weak. After falling by 0.7% mom in July, the prices of food and non-alcoholic beverages stagnated in August. Meanwhile, the prices of alcoholic beverages and tobacco fell by 0.4% mom, having risen by 0.2% the previous month. Lower food price dynamics in the summer months are traditionally influenced by seasonal factors associated with new domestic crops entering the market. According to the available information, the harvest was better than last year, which could support lower annual food price growth for the rest of the year. However, the downward trend in annual growth should be mainly affected by the impact of a higher comparative from 2H24, while cheaper fuel and energy could also have some effect. In August, annual growth in food and non-alcoholic beverage prices eased from 5.2% to 4.7%, while for alcoholic beverages and tobacco, it slowed from 4.4% to 2.7%.

Fuel prices were 0.9% mom lower in August. The impact of the conflict in the Middle East on oil prices, which pushed up prices at petrol stations in the previous two months, is gradually fading. In year-on-year terms, fuel prices continued to decline substantially, by 7.7% in August. This was supported by the significantly stronger koruna against the US dollar. Together with the trend of increasing oil production and weaker oil demand, this should keep fuel prices at lower levels. In addition, the downward trend in household energy prices persisted, with an average decline of 0.2% mom and 3.1% yoy in August.

Core inflation rose from 2.7% yoy in July to 2.8% yoy in August. This figure came in slightly above our forecast of 2.7%, while the CNB had expected 2.8%. We estimate that seasonally adjusted core inflation accelerated from 0.2% to 0.3% mom. However, this may be due to package holiday prices increasing by 3.9% mom this year, which is stronger than usual for August. This could be due to the unusually cold weather increasing demand for foreign holidays, so it may only be a temporary effect.

Services prices, including the impact of rapidly rising house prices, remained the main driver of elevated core inflation. In August, service inflation declined slightly from 4.8% to 4.7% yoy. Within this, growth in imputed rents remained unchanged at 4.9% yoy, while paid rents accelerated slightly from 5.6% to 5.7% yoy. Although mom growth in imputed rents was still strong (at 0.6% in August, following 0.4% in July), the impact on the annual pace is lessened by the higher comparative from 2H24. Conversely, goods price growth remained below the central bank’s 2% target, slowing from 1.4% to 1.1% yoy in August.

The August data confirm our expectation for a continued downward trend in headline inflation. According to our forecast, inflation will continue to fall gradually towards the central bank’s 2% target for the rest of the year. Core inflation should also decline but is likely to remain above 2.5% yoy. Next year, we expect headline inflation to average 1.9%, with core inflation averaging 2.0%. Over the monetary policy horizon, both price indicators should therefore align with the CNB’s target. This should be supported by the effects of tight monetary conditions, lower energy and fuel prices, and a weakening Czech economy and labour market due to US tariffs. This could pave the way for further interest rate cut by the end of the year. However, the persistence of high services inflation, potentially driven by stronger-than-expected wage growth, poses a risk to CNB rates remaining on hold until year-end. Nevertheless, consumer demand has been relatively weak in recent months.

Colt CZ's results for the second quarter of this year will be weaker yoy. The consolidation of ammunition manufacturer Sellier&Bellot, which began in mid-May 2024, will help offset the weaker performance of the firearms sector. The commercial segment in the U.S. has not yet recovered, and we do not anticipate delivering to the Czech Army in 2Q25. We estimate a yoy decline in total revenues of 7.5% to CZK5.6bn for 2Q25. According to our estimates, EBITDA of CZK1.2bn is weaker by 21.0% yoy. Colt will not meet its quarterly projections. Nevertheless, we expect Colt to confirm its full-year guidance.

Announcement date: Thursday, September 18, 2025, before the market

Colt CZ's results for the second quarter of this year will be weaker yoy. The consolidation of ammunition manufacturer Sellier&Bellot, which began in mid-May 2024, will help offset the weaker performance of the firearms sector. The commercial segment in the U.S. has not yet recovered, and we do not anticipate delivering to the Czech Army in 2Q25. We estimate a yoy decline in total revenues of 7.5% to CZK5.6bn for 2Q25. According to our estimates, EBITDA of CZK1.2bn is weaker by 21.0% yoy. Colt will not meet its quarterly projections. Nevertheless, we expect Colt to confirm its full-year guidance.  

The contribution from S&B, which has been part of Colt since mid-May of last year and therefore did not affect the entire second quarter of last year, will be positive in the second quarter of this year. S&B should be the driver of the results and should at least partially compensate for the firearms segment. The latter should see weaker performance in the US civilian sector, which fell by 3.1% yoy in 2Q25. There will also be a decline in the Czech Republic due to the absence of deliveries to the Czech Army. Some deliveries have likely been postponed to subsequent quarters. According to our estimates, Colt will report total 2Q25 sales of CZK5.6bn, a 7.5% yoy decline. EBITDA is expected to reach CZK1.2bn, reflecting a yoy decline of 21.0%. However, the margin should increase by +3.6pps to 20.9%. This increase is due to the consolidation of S&B and the higher margins in this sector. According to our estimates, net profit for 2Q25 will be CZK513m, a 21.8% yoy decline.

Guidance: We expect Colt's management to reiterate its FY targets of CZK 25 billion (+/- 10%) in revenue and CZK 5.5 billion (+/- 10%) in EBITDA. This is despite the fact that the pace of fulfillment appears to be slightly weaker and is heading towards the lower end of the projections. Our estimated revenues for 1H25 are 44.3% of Colt's full-year goal and 43.5% for EBITDA.

When we compare Colt's quarterly projections, it's clear that 2Q25 will likely miss its targets. The reasons are described above. According to the projection, Colt should report revenues of CZK6.0bn and EBITDA of CZK1.3bn for 2Q25. However, our estimates are CZK5.6bn in revenue and CZK1.2bn in EBITDA, which are below the current targets.