Gross Domestic Product
Actual (3Q/10): 1.1% qoq; 3.0% yoy
Consensus: 0.6% qoq; 2.5% yoy
Previous (2Q/10): 0.9% qoq; 2.4% yoy
Preliminary 3Q GDP release exceeded expectations and showed that the Czech economy managed to accelerate further. There are almost no details released, however, it seems to be obvious that mainly industrial production led by demand abroad supported positive GDP figure. Rising inventories also usually helps in this part of the business cycle. On the other hand, retails sales and government budget data suggest that consumption expenditures remain muted.
The Czech economy closely follows Germany, where GDP rose by 3.9% yoy in 3Q. This is hardly surprising when we realize that one third of total Czech exports flow to Germany. Regional peers are supposed to fare also well. Slovakia is forecasted to boost GDP by 3.7% yoy. Poland can surpass 3.5% yoy reached in 2Q. Hungary remains local laggard with GDP growing only by 1.6% yoy in 3Q.
Last GDP print lends support to hawks in the central bank. GDP in 3Q exceeded CNB’s forecast. The Czech economy is set to increase by 2.4% (maybe more) this year, while CNB’s forecast is a little bit lower. However, inflationary pressures are still negligible and core inflation remains negative. Thus, we can stick to the scenario that tightening cycle will start in 3Q or 4Q 2011.