Vladimír Urbánek (Kurzy.cz)
Macroeconomics  |  March 11, 2013 11:12:38

GDP - revision confirmed preliminary estimates, a year and a half of recession and stagnation

Week in which statisticians notify most important results, began somewhat inconsistent. Had confirmed the negative results for the GDP, while the value of the positive effect of inflation, which continues in a very temperate zones. And thanks to its decline at the end of the year started to rise and wages.

According to the detailed results of the economy decreased as compared to the last quarter of 2011 by 1.7%. A comparison of the third and fourth quarters of last year, the economy declined by 0.2%. This is the year's best quarterly results in 2012.On the resources side, it's no surprise that the construction industry has brought a very negative numbers, year fell by 6.2%. Construction since 2008 have not experienced growth year, so this year would be for him should be the notional date on which the bounce. The Czech construction market is not enough orders, and a number of planned projects from the pre-crisis period still stands. Investors are waiting for either the better or the projects are reviewing and looking for a less demanding option. Positive is the least compared to the situation in the third and fourth quarter, when construction increased by 1.9%.

The overall result of the economy but greatly impressed by the manufacturing industry, which is almost four times larger than the entire building. Manufacturing, which includes, inter alia, car production fell by 3.4% yoy and 0.7% qoq.Mainly reflected weaker demand for cars not only in the Czech Republic, but also in the rest of Europe. Volumes car registrations in the European Union since 2008, the overall decline, and December of last year was one of the worst.

Confirmed the well-known rule that a key element is the foreign trade. From the perspective of expenditure was one of the few that managed to give positive points for the economy. Exports grew by 1.4% and imports by 1.2%. With a surplus of exports over imports as the economy ended even worse. As well as bringing foreign trade positive points and expenditure of households bear the negative points. Household consumption is decreased by 4.1%. So bad result demonstrates the importance of household demand. Weak demand is given by general pessimism of consumers, and their feeling that the economic situation will soon improve.Therefore, rather save and spend, and the cycle of money in the economy is slowing down. Its share of that also had high prices last year, with rising unemployment, which diminishes the purchasing power demand.

Average wages are one of the key areas for consumers. The average nominal wage in the Czech Republic rose to 27,170 crowns. Fared significantly better mainly businessmen who were better off nominally by 4.2%. In contrast, businessmen, that employees were better off nominally slightly less, by 1.3%. Important but the result is adjusted for price increases. They grew in the last quarter by 2.8%. As a result, this means that the average wage increased by 0.9%. But the growth is mainly due to the entrepreneurs, employees observed a decline in real wages by 1.5%. Gives an important insight but median wage is lower than the average wage. Average increase because people with high incomes.The median in the fourth quarter of CZK 22,446. This year, but wages could actually grow both the business and employees.

Positive outlook for wage growth this year comes just a decline in inflation. This means that the price does not rise as fast as in previous months. After January's 1.9% inflation came a further decline to 1.7%. Prices now grow so fast mainly because consumer demand is minimal. Thus, sources of growth are more costs to the producer, or MIP. Almost half of the participating food inflation (0.8 percentage points), while clothing, transportation, and telecommunications showed price declines. Mom prices practically stagnated, growing only lackluster tenth of a percent.

Ing. Michal Kozub
Home Credit as

More precise data confirmed previously featured result: Czech economy in the final quarter of last year fell by 0.2 percent. This marks the sixth consecutive quarter, with GDP declining or stagnating. When compared to a decline in GDP increased to 1.7 percent. Negative contribution to GDP, household consumption and investment activity, while positively contributing foreign trade and stock changes. Over the past year, GDP fell by 1.2 percent after growth of 1.9 percent in 2011.

Household consumption in the fourth quarter declined by 4.1 percent. The available time series is not worse results. Signed to the combination of higher unemployment, falling real wages and an increase in the savings rate.The decline in demand was most apparent among durable goods (cars, etc.) that are not necessary for everyday life.

Gross fixed capital formation fell by 5.0 percent. Decreased particularly purchases of means of transport (10.7 percent) and construction investment. However, a positive contribution to GDP increased corporate stocks.

Significant decline in the economy prevented the continued positive development of foreign trade. The deteriorating situation in the euro area, however, significantly reduce the beneficial effect of this factor on the development of the Czech economy. Total exports in the 4th year quarter increased by 1.4 percent and imports by 1.2 percent. At the beginning of this year could even be the contribution of net exports slightly negative.

In terms of individual sectors, most notably in the GDP effect of the decline of the manufacturing industry by 3.4 percent.

Continuation of recession has increased the output gap, ie the difference between the actual performance of the economy and production using existing capacity, to 1.5 percent. This explains the absence of inflationary pressures in the economy. In its pre-crisis performance, which the Czech economy reached the 3rd quarter of 2008, lags GDP by 2.7 percent.

For full-year decline of 0.4 percent of GDP. Domestic demand will dampen the increase in unemployment and the ongoing fiscal austerity policy of the government. Negative impact on the Czech economy will also affect the expected continuation of recession in the euro area in the first half of this year.

David Marek, Patria Finance

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