Trade balance ended in surplus of CZK 8.1bn. in March, which is significantly below our expectation and the average market estimation. Export decreased by 5.6% y/y and import decreased by 2.4%. Although both sides of foreign trade were negatively influenced by a lower number of working days, the March numbers are still surprisingly low. The last decrease of export and import was recorded in January 2004 and July 2005, respectively.
Foreign trade results in March bring the first warning, following good results in January and February. At present, there are two negative factors weighing on the Czech foreign trade. The first factor is the slow-down of economy growth in the Eurozone and the second is fast strengthening of the CZK rate in the past nine months. So far, the economy has been successfully resistant. March decrease of export to Germany and the news of production reduction by some companies due to strengthening of the Czech crown could anticipate worse times. Although clear conclusions should not be drawn just yet from the few data, which were previously preceded by an influx of positive information, they certainly deserve our attention.
GDP growth estimate for the first quarter can be added following today´s figures. Given the negative surprise we have lowered our estimate to 5.5 %.