Czech Republic: Sequential GDP growth ticks up in Q2
GDP growth accelerated to 0.3% quarter on quarter in seasonally adjusted terms in Q2, picking up from Q1’s 0.2% rise, according to a preliminary estimate.
On an annual basis, the economy also strengthened at a more robust pace: GDP expanded 0.4% year on year in Q2, up from the prior quarter’s 0.3% increase; however, despite the acceleration, the print undershot market expectations.
While details are still pending, the statistical office reported that the quarterly improvement was due to stronger domestic demand, which was supported by higher final consumption expenditure. Employment rose by 0.5% quarter on quarter, likely supporting household spending; moreover, the 125 basis points worth of rate cuts by the Central Bank from December 2023 to March 2024 likely started to slowly trickle down to the real economy, providing further tailwinds. Less positively, external demand detracted from the overall GDP reading, according to the statistical office.
Looking at sectoral data, the quarterly upturn stemmed from positive developments in the trade, transport and accommodation sectors. Less positively, the industrial sector continued to contract.
Our panelists expect GDP growth in sequential terms to roughly double from Q2’s print in the remainder of the year, propelling H2 growth above that of H1. Additionally, overall in 2024, GDP growth is expected to make a comeback after the economy flatlined in 2023. A notable rebound in private consumption will spearhead this improvement; wage growth is expected to comfortably outpace inflation, supporting a recovery in purchasing power. That said, the upturn in GDP growth will remain underwhelming by historical standards as growth in public spending and investment will cool.