Czech Republic GDP Q2 2017

Czech Republic

Czech Republic: Economy jumps in Q2 on stronger fixed investment and private consumption

August 16, 2017

GDP grew a multi-year high of 2.3% over the previous quarter in Q2 in seasonally and working-day adjusted terms, according to an advance estimate released by the National Statistics Office (CSO) on 16 August. The result benefited from strong business investment and rising household spending. Moreover, it came in well above the 1.5% growth observed in the first quarter and surprised markets on the upside. In annual terms, GDP grew 4.5% in Q2, which represented a significant acceleration compared to the 3.0% rise observed in Q1.

Economic activity was buoyant in the second quarter, with tight labor market conditions, rising wages and low inflation underpinning consumer sentiment and thus fueling household spending. Moreover, expanding industrial production benefited from a strong car market and the strong PMI readings throughout the quarter showed that the economy had been underpinned by solid domestic and external demand, especially from EU countries, prompting Czech businesses to expand production and hire more staff. In terms of economic sectors, according to the National Statistics Office, the expansion was broad-based, covering both the manufacturing and service sectors.

The positive economic panorama should extend to the remainder of the year, which will translate into an acceleration of the economy compared to 2016 on the back of growing household spending, stronger external demand and a recovery of EU investment funds.

More detailed data will be released on 1 September.

The Czech National Bank expects the economy to expand 2.9% in 2017 and 2.8% in 2018. FocusEconomics Consensus Forecast panelists expect the economy to expand 2.6% in 2017, which is unchanged from the previous month’s projection. For 2018, the panel sees GDP increasing 2.6%.

Author: Massimo Bassetti, Economist

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