Czech Republic: Year-on-year GDP growth moderates in Q3, but underlying momentum remains robust
December 1, 2021
A second release revealed that the economy grew 3.1% in seasonally-adjusted year-on-year terms in the third quarter (previously reported: +2.8%), slowing from the 8.5% expansion logged in the second quarter, amid a waning base effect.
The slowdown was driven by weakening private consumption, fixed investment and exports. Household spending increased 6.4% in the third quarter, which was below the second quarter's 8.1% expansion. In addition, fixed investment growth slowed to 0.7% in Q3, from 1.6% in the previous quarter. Meanwhile, government spending growth accelerated to 5.0% in Q3 (Q2: +2.7% yoy).
On the external front, exports of goods and services fell 2.3% on an annual basis in the third quarter, which contrasted the second quarter's 30.9% expansion. In addition, growth in imports of goods and services slowed to 8.3% in Q3 (Q2: +31.8%).
On a seasonally-adjusted quarter-on-quarter basis, economic growth improved to 1.5% in Q3 (previously reported: +1.4%), following the previous quarter's 1.3% expansion. Q3's reading marked the best result since Q3 2020.
Commenting on the short-term outlook, Jiri Polansky, economist at Erste Bank, noted:
“GDP will likely fall in Q4 2021 in qoq terms, mainly due to problems in the automotive sector, where production was significantly reduced in October. However, high inflation and a negative pandemic situation also have a negative impact on the economy. GDP development should improve during the first quarter of the next year. However, it will depend on the development of the pandemic, and especially on the situation with international supply chains. Overall, despite a slowdown in household consumption and the currently low car exports, total demand for Czech production remains relatively high.”