PRAGUE, Feb 12 (Reuters) - The Czech economy unexpectedly
dropped 0.6 percent from the previous three months in the fourth
quarter, widely missing analysts' forecast for a 0.8 percent
rise, preliminary data showed on Friday.
The statistics office did not release a breakdown of its
flash GDP estimate, but said the annual drop was mainly due to a
6.9 percent decrease in taxes on products, especially due to
high comparative basis in the third quarter.
Analysts said the drop in taxes -- the sales and excise
levies -- indicated low consumption in the fourth quarter.
They said the number was poor sign for the Czech recovery,
which may hurt budget revenues and would leave interest rates at
record lows for months to come. Some said it could even lead to
speculation on a further rate reduction.
The statistical bureau said on the positive side, gross
added value rose 0.2 percent, thanks to a recovery in industry.
The number was completely out of the range predicted by
analysts in a Reuters poll, where the most pessimistic estimate
was for a 0.4 percent quarterly drop. <CZ/ECON17>
The poor Czech number followed news of a fourth-quarter
stagnation in Germany, the Czechs' key trade partner which was
expected to grow by 0.2 percent.
The crown currency was volatile after the decision, jumping
as high as 25.900 to the euro <EURCZK=> before dipping back to
26.0, seen ahead of the data. A trader said interest rates
ticked marginally lower but the market was still looking for an
interest rate hike in the second half.
The gross domestic product fell 4.2 percent year-on-year in
real terms in the fourth quarter, and the full-year drop was 4.3
percent.
The market had expected a seasonally-adjusted year-on-year
fall of 2.8 percent, following a third quarter drop of 4.1
percent.
****************************************************************
KEY POINTS:
GROSS DOMESTIC PRODUCT
(pct change) Q4/09 Q3/09 Fcast Q4
quarter/quarter -0.6 (0.8) 0.8
year/year -4.2 (-4.1) -2.8
Details of Q4GDP data...........................[]
- The Czech Statistics Office will release full details on
March 11.
-
COMMENTARY:
PETER ATTARD MONTALTO, EMERGING MARKETS ECONOMIST, NOMURA
"Big downside surprise and means that Czech is now
performing worse in y-o-y terms than Hungary. I think Czech's
undiversified export base and given a slow recovery in europe
was to blame, combined with an economy that hasn't had the same
competitiveness boost from its currency as its neighbours.
"Also, we saw a strong household sector at the start of this
crisis but the external slowdown has (with a lags) fed through
and I think we are still feeling that and there is more pain to
come.
"Growth in 2010 is therefore likely to be very low. I think
this increases the chances of a rate cut as it provides a lower
base for the MPC's W shape recovery fears, though I continue to
believe a cut would have zero effect on credit and so the
economy."
RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MANAGEMENT
"Preliminary statistics on Czech GDP for fourth quarter 2009
is a disappointment. Not only that the result is much weaker
than expected but GDP actually declined versus previous quarter
in quarter-to-quarter comparison.
"If this is repeated in first quarter of the New Year, then
Czech economy would be technically in recession again. It looks
like we should be ready for weak data on domestic demand, once
detailed statistics are released in March.
"This preliminary data is bitter surprise with potentially
negative implications for the Czech crown and not good news for
near term fiscal outlook, i.e. for mid and long segment of the
yield curve. For Czech central bank this of course sends signal
that interest rates should remain at their record low levels in
months to come."
PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT, PRAGUE
"(Quarter-on-quarter drop) is a huge surprise not only for
me but for the market. I have to say frankly I can't quite
understand the reason behind this decline..."
"OK, I would understand the gross value added only increased
0.2 percent quarter-to-quarter, and is worse than I would have
expected, but still the deviation is not that big. But why on
earth has the figure changed... to minus 0.6 percent."
"It was explained by a decline in the taxes from products,
which seems to me strange."
"For the moment, I would incline to believe the figure will
be revised upward later... but not to a plus figure."
JAROMIR SINDEL, CHIEF ECONOMIST, CITIBANK, PRAGUE
"It was broadly in line with our expectations, we expected a
0.4 percent contraction. A positive thing was a contribution
from industry when added value was falling more slowly than the
GDP, so it was a positive contribution quarter on quarter."
"Overall, it reflects a drop in the effective domestic
demand and investment probably also recorded some drop."
"The GDP is composed on the supply side from an added value
which includes industry, services, construction... and a tax on
products which are products at which it is impossible to
allocate the taxes among the sectors. It is a special category
of taxes which is often quite volatile, they are indirect taxes
on products."
PIOTR MATYS, ANALYST, 4CAST
"This is undoubtedly very disappointing data sending a
warning signal that the Czech recovery could be very bumpy and
was we mentioned on many previous occasions may prove
unsustainable."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"Strong surprise, negative surprise... It is maybe due to
the end of car scrapping (subsidies) in Germany, especially due
to low domestic demand."
"This is something that could lead some people to think
about another possible rate cut -- I don't believe it, but it
can be a subject of speculation with negative impact on the
Czech currency."
MARKET REACTION:
The crown currency firmed to as high as 25.900 to the euro
<EURCZK=> after the data but returned to levels around 26.0,
seen ahead of the news.
BACKGROUND:
- For story on analysts' expectations before the data release,
double click on []
- Slovak Q4 GDP []
- Hungary's Q4 GDP []
- Poland's FY 2009 GDP []
LINKS:
- For further details on fourth quarter GDP and 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 Jan Lopatka)
