Czech Republic: Economy contracts for 6th consecutive period, but sequential data paints more positive picture
September 3, 2013
In the second quarter, GDP decreased a seasonally and calendar-adjusted 1.3% over the same quarter last year (preliminary estimate: -1.2% year-on-year), according to the revised data. The reading represents an improvement compared to the 2.4% contraction recorded in the first quarter; this is, however, the sixth consecutive period of decline in economic activity.
The milder decrease in the second quarter reflects an improvement in total consumption and in the external sector. Total consumption grew 0.5% annually in Q2 as both private consumption (Q1: -0.7% yoy; Q2: +0.5% yoy) and government consumption (Q1: +1.2% yoy; Q2: +1.4% yoy) improved compared to the previous quarter. Conversely, total investment saw the sharpest decline since the last quarter of 2009, plunging 12.6% in Q2. The drop reflected a strong destocking of inventories and a 6.2% decrease in gross fixed investment.
On the external front, exports of goods and services swung from a 3.1% decline in Q1 to a 2.0% expansion in Q2. Imports increased 0.5%, which contrasts the 3.2% contraction observed in Q1. Consequently, the external sector's net contribution to overall economic growth improved notably to plus 1.3 percentage points in Q2, up from minus 0.3 percentage points in Q1.
A quarter-on-quarter comparison paints a more positive picture for the Czech economy. GDP grew a seasonally-adjusted 0.6% in Q2 (Q1: -1.3% qoq), which represents the first expansion after six periods of declining output - the longest recession since records began in 1996.
The Czech National Bank expects economic activity to decline 1.5% this year and to rebound in 2014, expanding 2.1%. FocusEconomics Consensus Forecast panelists are more optimistic and expect the economy to decline 0.7% this year, which is unchanged over the previous month's projection. For 2014, the panel sees the economy increasing 1.7%.
Author: Ricardo Aceves, Senior Economist