Economic activity comes in broadly in line with the CNB forecast
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 2.5% year on year in 2014 Q1. In quarter-on-quarter terms, it was up by 0.4%. Compared to the CNB forecast, the reported growth in economic activity in 2014 Q1 is 0.2 percentage point lower in year-on-year terms and 0.2 percentage point higher in quarter-on-quarter terms. The differences in level and direction between the year-on-year and quarter-on-quarter deviations from the CNB forecast are due to a revision of the GDP time series for previous quarters. Given these minor and moreover contrary deviations, it can be stated that the CNB inflation forecast was fulfilled overall.
The resulting only minor downward deviation of annual GDP growth from the CNB forecast in Q1 reflected lower additions to inventories than the CNB had expected. On the other hand, this was almost fully offset by better-than-forecasted developments in all remaining components of domestic demand and also net exports. A one percentage point positive deviation from the forecast was recorded for household consumption, whose annual growth picked up slightly further to 1.5%. At the same time, the 5% increase in gross fixed capital formation exceeded the CNB’s expectations by about 2 percentage points. Annual growth in government consumption was also above the CNB forecast. The year-on-year increase in net exports, which was somewhat larger than predicted by the CNB, affected the deviation from the GDP forecast in 2014 Q1 in the same direction – albeit to a lesser extent than final domestic demand. This increase was a result of slightly higher-than-expected growth rates of both exports and imports of goods and services.
Overall, the CNB’s expectations that annual GDP growth would pick up pace in 2014 Q1 amid a further modest quarter-on-quarter growth in economic activity thus materialised. At the same time, the new data confirm that the recovery in household consumption and fixed investment growth observed at the end of last year is sustained in nature and is associated with a positive change in the expectations of domestic economic agents. This change was due – in addition to a recovery in external demand – to the easing of monetary policy by the CNB via the weakening of the koruna. The combined effect of these two favourable factors is also reflected in foreign trade. The current CNB forecast therefore expects the Czech economy to grow noticeably this year after last year’s decline. Accelerating growth in external demand and easy monetary conditions, coupled with slightly expansionary fiscal policy, will lead to GDP growth of 2.6% this year. Economic growth will then pick up to 3.3% in 2015, significantly aided by fiscal policy.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the GDP figures for 2014 Q1
Economic activity comes in broadly in line with the CNB forecast
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 2.5% year on year in 2014 Q1. In quarter-on-quarter terms, it was up by 0.4%. Compared to the CNB forecast, the reported growth in economic activity in 2014 Q1 is 0.2 percentage point lower in year-on-year terms and 0.2 percentage point higher in quarter-on-quarter terms. The differences in level and direction between the year-on-year and quarter-on-quarter deviations from the CNB forecast are due to a revision of the GDP time series for previous quarters. Given these minor and moreover contrary deviations, it can be stated that the CNB inflation forecast was fulfilled overall.
The resulting only minor downward deviation of annual GDP growth from the CNB forecast in Q1 reflected lower additions to inventories than the CNB had expected. On the other hand, this was almost fully offset by better-than-forecasted developments in all remaining components of domestic demand and also net exports. A one percentage point positive deviation from the forecast was recorded for household consumption, whose annual growth picked up slightly further to 1.5%. At the same time, the 5% increase in gross fixed capital formation exceeded the CNB’s expectations by about 2 percentage points. Annual growth in government consumption was also above the CNB forecast. The year-on-year increase in net exports, which was somewhat larger than predicted by the CNB, affected the deviation from the GDP forecast in 2014 Q1 in the same direction – albeit to a lesser extent than final domestic demand. This increase was a result of slightly higher-than-expected growth rates of both exports and imports of goods and services.
Overall, the CNB’s expectations that annual GDP growth would pick up pace in 2014 Q1 amid a further modest quarter-on-quarter growth in economic activity thus materialised. At the same time, the new data confirm that the recovery in household consumption and fixed investment growth observed at the end of last year is sustained in nature and is associated with a positive change in the expectations of domestic economic agents. This change was due – in addition to a recovery in external demand – to the easing of monetary policy by the CNB via the weakening of the koruna. The combined effect of these two favourable factors is also reflected in foreign trade. The current CNB forecast therefore expects the Czech economy to grow noticeably this year after last year’s decline. Accelerating growth in external demand and easy monetary conditions, coupled with slightly expansionary fiscal policy, will lead to GDP growth of 2.6% this year. Economic growth will then pick up to 3.3% in 2015, significantly aided by fiscal policy.
Tomáš Holub, Executive Director, Monetary and Statistics Department