After all, the results of the Czech economy for the second quarter turned out a bit better and, according to our expectations. Although the flash estimate indicated quarter-on-quarter growth of 0.6 percent, GDP eventually grew by 1 percent. It is still only half the growth compared to the EU, but given the length of the domestic lockdown and the emerging problems of the input industry at the time, it is still a solid result. Loose services also experienced a restart in this quarter, especially in the trade sector, including accommodation and food service activities.
Year-on-year GDP growth is impressive at first glance, but it has to be repeated that it is calculated from the very low base of last year’s second quarter, when the economy fell by almost 11%.So it is definitely not enough to return to the pre-corona level yet. And the same goes for household consumption and investment, which are starting to pick up again this year.
This time, household consumption had the greatest credit for economic growth. Consumers began to make deferred purchases of goods and the recovery – albeit to a much lesser extent – was also experienced by services. In real terms, people spent 10% less than in the same period in 2019. The reason was not only the fact that the disintegration came during the quarter, but also a certain caution when returning to restaurants and hotels. Of course, a change in consumer habits cannot be ruled out, which, however, has yet to be confirmed by time. The Czech economy also continued to lack foreign tourism, so that foreigners’ spending was still only half that of the second quarter of 2019.
The recovery of investment activity, which has been evident since the beginning of this year, can be considered positive. Companies are returning to their previously suspended projects, although now they have to reckon with making new investments more expensive. The current economic recovery is associated with significantly higher production and consumer inflation , the main causes of which are outside the CNB’s influence or outside the Czech Republic.
Today’s revised GDP figures sound slightly positive, but they give no reason to change the outlook for the rest of this year. The second half of the year will also be marked by a recovery in services, which, however, will return to pre-crisis levels much longer than, for example, industry .It will continue to be hampered by a shortage of imported components, and will also cope with rising input prices.
Author: Petr Dufek – ČSOB
