PRAGUE, March 11 (Reuters) - The Czech economy expanded by
0.3 percent in the fourth quarter from the previous three-month
period, slower than previously thought and adding to arguments
that the central bank will not hurry to raise interest rates.
The quarterly data was below a preliminary estimate of 0.5
percent, the statistics bureau said on Friday.
On an annual basis, the economy grew by a real 2.6 percent
between October and December, below a preliminary estimate of
2.9 percent released on Feb. 15.
The statistics office said the downward revision versus the
preliminary estimate was due to a change in the development in
indirect taxes.
The Czech year-on-year growth was worse than the growth in
neighbouring Slovakia, which posted a 3.5 percent year-on-year
rise in October-December and Poland's 4.4 percent year-on-year
growth. It was better than 1.9 percent growth in Hungary.
For the whole of 2010, GDP grew by 2.2 percent, slower than
a preliminary estimate of 2.3 percent.
Other data showed Czech industry expanded by 16.9 percent
year-on-year in January versus 4.9 percent growth a year
earlier, above expectations for a 13.0 percent rise.
In December industry after revision grew by 12.0 percent,
worse than previously reported growth 12.7 percent.
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KEY POINTS:
Details of Q4 GDP data..........................[]
Details of January industrial output............[]
MARKET REACTION
The Czech crown <EURCZK=> was a touch stronger at 24.345 to
the euro from 24.365 before the data.
COMMENTARY
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"Today's data brings a mixed picture. While GDP being
revised down is a disappointment, industry (growth) is on the
other hand faster. It shows the recovery in different sectors
other than industry is not as strong as thought so far."
"Industry is driven by a recovery in demand for exports, but
the rest of the domestic economy shows how the government is
trying to cut the budget deficit, which puts a brake on the
economy and leads to high unemployment. So next to foreign
demand, the domestic economy remains subdued, which explains the
negative revision."
PETR DUFEK, CHIEF OF MARCROECONOMIC RESEARCH, CSOB
"On the one hand there is the fast expanding industry, on
the other hand a weak rest of the economy. That is the picture
of the economy after the GDP revision."
"The key role is played by industry, mainly cars and
electronics. But agriculture, construction and partly also
services cannot boast positive results."
"The latest data show the economy remains two-speed, driven
mainly by industry linked to rising foreign demand."
"The economy is developing much more poorly than expected by
the central bank, which expected a 3.5 percent growth. Along
with the development in wages and inflation, the GDP data is
another number that speaks for a moderate stance of the central
banks in the nearest months."
HELENA HORSKA, ANALYST, RAIFFEISENBANK
"The market is disappointed once again because before the
preliminary estimate it had expected more than 3 percent
growth."
"Weak domestic demand continues to be the reason for the
slowdown in the Czech economy. A drop in real wages and growth
in unemployment has undercut household consumption."
"The government continued in its belt-tightening policy
which was reflected in government consumption."
KEY DETAILS
GROSS DOMESTC PRODUCT
- The annual development was affected by an 8.8 percent drop
in product taxes, including the value added tax (VAT) on the one
hand, and by a significant 4.1 percent rise in gross added
value, the office said.
- The gross added value was driven mainly by a 16.7 percent
annual rise in the manufacturing industry.
- Household and government final consumption expenditures
dropped by 0.4 percent and 1.6 percent, respectively.
- Fixed capital formation also fell, the office said.
- Inventories grew in the fourth quarter helping the total
gross capital formation rise by 11.2 percent .
INDUSTRIAL OUTPUT
- Overall new orders rose 19.2 percent year-on-year, and new
orders from abroad increased by 25.5 percent.
- Orders in basic metal production and steelmaking grew by
47.4 percent.
- Construction output, measured by a separate index, rose
8.3 percent year-on-year in January.
CENTRAL BANK FORECAST: The central bank had forecast
fourth-quarter GDP growth of 3.5 percent in its most recent
projection in February. I also expected growth for the whole of
2010 at 2.4 percent, while analysts in a Reuters poll saw it at
2.3 percent.
The bank cut interest rates to a record low of 0.75 percent
on May 6, 2010.
BACKGROUND:
- Market expectations before release []
- Slovak Q4 GDP..................................[]
- Poland's Q4 GDP................................[]
- Hungary's Q4 GDP...............................[]
- Report on last Czech c.bank rate decision......[]
[] [] [] []
[]
LINKS:
- For further details on fourth quarter GDP, January industrial
and construction output and other past data, Reuters 3000 Xtra
users can click on the Czech Statistical Bureau's website:
http://www.czso.cz/eng/csu.nsf/kalendar/2004-hdp
- For LIVE Czech economic data releases, click on <ECONCZ>
- Instant Views on other Czech data []
- Overview of Czech macroeconomic indicators []
- Key data releases in central Europe []
- For Czech money markets data click on <CZKVIEW>
- Czech money guide <CZK/1>
- Czech benchmark state bond prices <0#CZBMK=>
- Czech forward money market rates <CZKFRA>
(Reporting by Jana Mlcochova; editing by Patrick Graham)
