Quarterly National Accounts of the Czech Republic

Commentary

Gross Domestic Product in 2nd Quarter of 2004

According to preliminary estimates GDP increased in Q2 by 4.1 % at constant prices year-on-year. A higher growth (4.7 %) was last achieved in Q4 2000. At the same time the growth of GDP that had been estimated for Q1 2004 was updated from 3.1 % to 3.5 %, when the new calculation used more accurate data on external trade and from statistical surveys. After adjustments for seasonal fluctuation, it grew by 1.2 % q-o-q.

Characteristic of the two quarters was that capital expenditure outstripped final consumption in growth. Constant price final consumption expenditure increased in each of the quarters by 2.1 %, while capital formation expenditure increased further in Q2, by 13.9 % year-on-year, after its marked rise by 13.1 % in Q1. Q2 also saw a considerable increase in external trade turn over at current prices. In real terms, however, the aggregate balance of goods exports and imports and of services revenue and expenditure was highly affected again by positive development of terms of trade. While at current prices the balance got better by CZK 3.9 billion, it recorded a decrease of CZK 1.1 billion at the previous year’s prices.

Year-on-year development of the individual components of GDP in Q2 at constant prices:

Final consumption expenditure rose really, particularly due to the growing consumption of households (+3.4 %). By slowing down the year-on-year growth of expenditure by 0.6 percentage points in Q2 compared to Q1, the households reacted to a drop in the increase in nominal and real wages.
Expenditure of institutions coming under the government sector dropped by 1.1 %.
Expenditure on gross fixed capital formation accelerated further – after the growth over the whole calendar year 2002 by 3.4 % on average, acceleration in 2003 by 7.4 %, and 9.6 % increase in Q1 this year, investments in fixed assets increased in Q2 by 12.8 % year-on-year. This was in agreement with statistics on the development of industrial and construction output.
External balance of goods and services in total was determined by the dynamic development of its two components – exports at current prices were by CZK 111.6 billion (28.3 %) and imports by CZK 107.7 billion (26.7 %) up on Q2 2003. Really (at current prices of the previous year), the external trade as a whole continued exercising its negative effect on the development of GDP. The growth of export prices (104.2 %) still outstripping that of import prices (101.6 %) made exports grow slower (23.1 %) than imports (24.7 %) in consequence.

As far as individual industries are concerned, manufacturing, quarrying and mining and electricity, gas and water supply (with their constant price gross value added 8.1 % up year-on-year), trade, transport and construction did best. Agriculture remained below its last year’s level, and selected, mostly non-market services provided primarily by institutions of the government sector dropped, too.

At current prices, GDP grew in Q2 by CZK 53.4 billion (+8.2 %) year-on-year. The aggregate price level measured by the implicit deflator of GDP was 4.0 percentage points up on the corresponding period of last year.

The nominal disposable income of the households sector amounted at current prices to CZK 364.1 billion, growing 5.0 % y-o-y. Of their current income, households spent 61.7 % on individual consumption and their current expenditures and saving accounted for 31.8 % and 6.5 % respectively. The principle income item (wages paid) grew 3.8 %. In terms of current prices, households spent CZK 16.2 billion more than in the 2nd quarter of 2003, y-o-y growth being 5.1 %, coping with the problem of possible shortage of resources by raising the share of loan purchases. Gross saving rose by CZK 1.6 billion y-o-y up to CZK 35.3 billion. The rate of saving – ratio of gross saving to gross disposable income – dropped from 9.72 % in the 2nd quarter of 2003 to 9.70 %.