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Czech Republic GDP Q2 2019

Czech Republic: Growth stable in Q2

The economy grew a seasonally-adjusted 2.7% year-on-year in the second quarter, matching both Q1’s reading and the preliminary release, according to a detailed breakdown of GDP released by Czech Republic’s Statistical Institute on 30 August. In quarter-on-quarter seasonally-adjusted terms, however, growth ticked up to 0.7% in Q2 from 0.6% in Q1.

Domestic demand weakened in the quarter. Fixed investment continued to lose steam in Q2, with growth falling to an over two-year low (Q2: +0.9% year-on-year; Q1: +3.3% yoy). Lower investment in transport equipment and machinery, weighed on by a pronounced slowdown in the German economy, further dragged on domestic demand. That said, private consumption was solid (Q2: +2.7% yoy; Q1: +2.7% yoy) amid solid wage growth and an extremely tight labor market. Notably, the unemployment rate remains the lowest in the entire EU. Meanwhile, government spending picked up some pace (Q2: +3.4% yoy; Q1: +3.0% yoy).

On the external front, metrics improved. Exports growth accelerated to 2.2% year-on-year, up from Q1’s 1.4% expansion but still historically weak, weighed down by subdued demand from key trading partners in the EU. Meanwhile, imports expanded 1.4% year-on-year in Q2, down from 2.0% in the prior quarter. Taken together, the external sector contributed 1.1 percentage points to growth, an improvement from Q1’s 0.1 percentage point expansion.

Looking ahead, growth is expected to moderate slightly this year but should remain healthy overall. Particularly, consumer spending is set to propel growth ahead as households benefit from robust labor market conditions and firm wage gains. Meanwhile, fixed investment growth is seen easing after reaching its peak last year. Global trade conflicts and a sharper slowdown in demand from the EU cloud the outlook.

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