Czech Republic: Economy loses momentum in Q3 and undershoots expectationsEconomy unexpectedly loses momentum in Q3
Sequential growth wanes in Q3, misses expectations: GDP growth decelerated to 0.3% quarter on quarter in seasonally adjusted quarter-on-quarter terms in the third quarter, according to a preliminary estimate. The result came in below the prior quarter’s 0.4% increase and both market and the Central Bank expectations.
Conversely, on an annual basis, the economy gained further steam and expanded 1.3% year on year in seasonally adjusted year-on-year terms in the three months to September, more than double the prior three months’ 0.6% rise; the result was the best in two years. That said,, but it still undershot market projections.
External demand continues to lag: While Aa full breakdown is still pending, but the statistical office reported that the quarterly moderation was due to still-weak exports, particularly to Germany; a stagnation in overall external demand stagnated.
More positively, the domestic front appeared more dynamic: Private consumption demand continued to recovergrew, according to the statistical office, potentially driven by stronger private spending:. IInflation averaged below Q2 in Q3fell in Q3, and it was likely outpaced by wage growth—as it has been the case since Q1 2024—. Moreover, employment rose 0.5% quarter-on-quarter, matching the prior three months’ increaseand by the start of the quarter,. Additionally, the Central Bank had cut borrowing costs by 225 basis points worth of cuts by the Central Bank from since December 2023 to June 2024 likely started to trickly down to the real economy, providing further tailwinds.
Looking at sectoral data, the statistical office said that the manufacturing and construction sectors output were supportived of growth.
Broad-based economic improvement ahead: Our panelists expect GDP growth in sequential terms to roughly double from Q3 in Q4, and accelerate further in Q1 2025, to then before stabilizinge through Q4 2025. Purchasing power will be supported by receding inflation—, wwhich will be outpaced by wage growth—, ssupporting the continued recovery in purchasing powerprivate spending in turn. Additionally, the Central Bank’s ongoing loosening cycle will help boost fixed investment once the its impact of the interest rate cuts trickles down to the real economy. Externally, exports should improve over the coming quarters following Q3’s stagnation.
A full release will be published on 29 November.