Czech economy successful in the Q2

Revised figures confirmed the Czech economy is among the EU's strongest

The gross domestic product (GDP) was 2.5 percent higher in the second quarter of 2017 compared to the previous quarter; in a year-on-year comparison Q2 2017 increased by 4.7 percent over Q2 2016, according to refined estimates by the Czech Statistical Office (ČSÚ). This is higher than the previously released preliminary estimate, which had the increases at 2.3 percent quarter on quarter and 4.5 percent year-on-year.

The refined estimate confirmed that the fast growth seen in Q1 2017 had continued. The results mean that the Czech economy is one of the fastest growing ones in the European Union.

The favorable development of the Czech economy was contributed to by both the domestic and external demand.

The results were ahead of most predictions from economists. There is a downside, though. The favorable data may increase the likelihood of further interest rate growth by the Czech National Bank (ČNB). “The fast-growing economy, the overheated labor market and inflation above target will most likely cause the central bank to raise interest rates this year, probably in November, but perhaps in September,” Czech Banking Association (ČBA) chief economist Eva Zamrazilová told online daily Actualne.cz

On the demand side, GDP growth in Q2 was supported both by the domestic and external demand. Along with household consumption, which has been growing for a long time, there is new investment activity among the domestic demand growth factors. The year-on-year GDP growth was contributed to by investment expenditure, which was up 1.7 percentage points, household consumption, up 1.5 percentage points, and external trade, up 2.1 percentage points, according to ČSÚ statistics.

Final consumption expenditure of households was 1.8 percent up quarter-on-quarter and 4.4 percent year-on-year. Expenditure increased in all categories of consumption.

Final consumption expenditure by the general government increased by 0.4 percent quarter-on-quarter and by 1.9 percent year-on-year.

Both year-on-year and quarter-on-quarter growth of investment activity was supported in Q2 by investments in all categories of assets.

Investments grew not only in transport equipment and dwellings, but very strong investments were made also in machinery and equipment; growing investment expenditure went into other buildings and structures. In the quarter-on-quarter comparison, the fixed capital formation was 6.3 percent higher; compared to the corresponding quarter of the previous year, it increased by 7.7 percent, the ČSÚ stated.

Stable results on external trade also contributed to Czech economy growth. The balance of external trade in goods and services in the Q2 2017 at current prices reached Kč 92.9 billion. Exports, which increased in real terms by 7.3 percent year-on-year, were driven by trade in transport equipment and also by trade in machinery and electrical equipment. The growth of imports by 6.2 percent was significantly contributed to by subdeliveries for the automotive industry, manufacture of electrical equipment and trade in basic metals.

The Czech economic growth continued to be accompanied by growth of employment. Total employment was up 0.4 percent quarter-on-quarter; in the year-on-year comparison it increased by 1.3 percent. Development on the labor market thus continued to copy the Czech economic performance growth, according to a ČSÚ analysis.

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