Czech Republic: Economic activity tumbles for the third consecutive quarter
December 7, 2012
In the third quarter, GDP contracted a seasonally and calendar-adjusted 1.3% over the same period the year before, according to revised data published by the Czech Statistical Office. The figure was revised upwards from the initial 1.5% decline reported in the 15 November flash estimate but still came in below the 1.0% contraction recorded in the second quarter. The reading was significantly lower than the Central Bank's estimate of a 0.8% decline and represents the worst result since the final quarter of 2009.
The quarterly slump reflected a struggling domestic sector, as the harsh austerity measures undertaken by the government dampen consumption and investment. Total consumption contracted 2.4% in the third quarter, driven by a decline in private consumption (Q2: -2.8% year-on-year; Q3: -2.4% yoy), while government spending remained flat over the previous quarter (Q2: -1.6% yoy). In addition, total investment nosedived 9.4% in Q3, dragged down by a 2.3% decline in gross fixed investment and a strong downward shift in inventories.
Exports of goods and services decelerated from a 4.9% increase in Q2 to a 4.7% expansion in Q3. Meanwhile, on the back of weak domestic demand, imports slowed further to 1.6% in Q3 from a 4.0% rise in Q2. As a result, the external sector's net contribution to overall economic growth improved from 1.1 percentage points in the second quarter to 2.7 percentage points in the third.
On a quarter-on-quarter basis, GDP declined a seasonally adjusted 0.3% in the July-September period, which followed the 0.4% contraction registered in the second three-month period.
The Central Bank expects the economy to have contracted 0.9% in 2012, before growing 0.2% in 2013.
Author: Ricardo Aceves, Senior Economist