Czech Republic: Economic activity contracts for second consecutive quarter
September 7, 2012
In the second quarter, GDP declined 1.0% over the same quarter a year ago in seasonally and calendar adjusted terms, according to revised data released by the statistical institute on 7 September. The print was revised upwards from the 1.2% contraction reported in the 14 August flash estimate but still came in below the 0.5% decline recorded in the first quarter. That said, the figure was broadly in line with market expectations of a 1.1% decline. The deterioration in the second quarter was entirely driven by domestic demand, reflecting the impact of the strong austerity measures undertaken by the government. Total consumption plunged 3.3% in Q2, driven by a sharp decline in both private consumption (Q1: -2.4% year-on-year; Q2: -3.4% yoy) and government spending (Q1: -0.5% yoy; Q2: -0.9% yoy). In addition, growth in gross fixed investment remained flat over the same period last year, which represented a deceleration compared to the 1.6% expansion recorded in the first quarter. Meanwhile, weaker global demand amid the perennial Eurozone crisis took its toll on exports of goods and services, which slowed from a 6.9% increase in the first quarter to a 3.9% expansion in the second. Imports grew 1.1% in Q2, weaker than the 3.1% expansion recorded in Q1. Consequently, the net contribution from the external sector to overall economic growth fell from 3.6 percentage points in the first quarter to 2.5 percentage points in the second. A quarter-on-quarter comparison confirms the contraction suggested by the annual data, as GDP fell a seasonally adjusted 0.2% in Q2, which followed the 0.6% contraction observed in the January-March period. The second-quarter result represents the fourth consecutive decline in economic activity, thus intensifying the recession.
Author: Ricardo Aceves, Senior Economist