June trade deficit outdid all expectations when it reached CZK 10.3 bil (market consensus was CZK 5 bil. deficit). Moreover, June is seasonally good month for trade deficit, as Czech exporters hurry to finish exports before long summer sets in and the Czech Republic co. all but falls to sleep. This year, exports grew by healthy 23% and for the first time crossed the CZK 100 bil. threshold. Imports, however, shot up by more than 31% reaching all-time-high CZK 112 bil. If foreign trade prolongs this burst, imports may reach almost 100% of GDP in Q4/2000.
Trade deficit in June comes after a strong growth of retail sales in May (+8.4%) and confirms a change in attitude of Czech economic subjects: gone are savings and cautious spending, in is a shopping spree. However, the spree has not, so far, been supported by a similar acceleration in production, so shoppers are turning toward imported goods. We expect anxiously the July trade deficit. If it exceeds our forecast of CZK 8 bil. we may reconsider our forecast for the trade deficit in year 2000 that is currently unchanged at CZK 100 bil.
There has been no radical reaction to the number at the Czech markets. The koruna dipped against the euro from 35.55 to 35.63 CZK/EUR, and it remains at 38.00 CZK/USD. Bond prices fell immediately after the announcement, but recovered quickly and now stand where they started the day.
(Ondrej Schneider)