External trade - 3. quarter of 2006

 
External trade relations developed favourably in Q1-Q3 2006, which is proved by increases in exports and imports, size of the trade balance surplus, changes in the commodity structure and especially in the destination of external trade flows (predominantly exports).
 
In Q1-Q3 2006 compared with Q1-Q3 2005:
- the growth rates of exports and imports were higher and reached double-digit (nearly equal) values - 13.1% for exports and 13.2% for imports. The increases were affected mainly by the development in Q1 when exports and imports grew by 18.9% and 19.1% respectively year-on-year; year-on-year increases in Q2 were 10.2% and 11.3% respectively, and in Q3 10.8% and 9.9% respectively. External trade turnover was higher by 13.2% (CZK +355.1 billion) and reached CZK 3 049.4 billion; the share of exports (CZK +179.5 billion) in the turnover increase was 50.6%, the share of imports (CZK +175.6 billion) was 49.4%. Due to the appreciation of CZK against EUR and USD, external trade grew faster in EUR (exports +19.1%, imports +19.2%) and in USD (exports +17.4%, imports +17.6%) than external trade in CZK;
 
In comparison to the EU25 as a whole, external trade of the Czech Republic recorded higher dynamics; in comparison to the new EU member states the growth of external trade was roughly at the same level. Data released by Eurostat on 18 October 2006 available for January-July 2006 show that EU25 exports and imports in EUR were up by 13.3% (EU15 +12.7%) and 15.5% (EU15 +15.0%) respectively year-on-year on average in the same period. Exports and imports of the 10 countries, which have been members of the EU since 2004, were higher by 20.8% and 21.0% respectively year-on-year on average. In the same period the share of these 10 countries in total EU25 exports increased from 7.5% to 8.0% year-on-year and their share in total EU25 imports reached 8.7% (8.3% in the same period of 2005). The EU25 trade balance reached a deficit of EUR 38.8 billion in January-July 2006 (of which the EU15 deficit was EUR 21.6 billion and the 10 new member states deficit EUR 17.2 billion). The Czech Republic as the only one among the new EU member states registered a surplus, albeit lower than in January-July 2005.
 
- external trade surplus was by CZK 4.0 billion higher. The trade balance, which was active in all quarters of 2006, reached a surplus of CZK 41.4 billion. By group of countries, trade surplus with the EU25 and with European transition economies grew, whereas trade deficit with other states ¹, CIS ² and developing economies increased. In terms of commodity structure, trade balance worsened in all SITC sections except ‘machinery and transport equipment’ and ‘miscellaneous manufactured articles’ where the surplus increased year-on-year. Trade deficit in ‘mineral fuels, lubricants and related materials’ continued growing markedly and remained the highest among all SITC sections; the second highest deficit was still reported for ‘chemicals and related products’;
- by group of countries, the position of the EU25 in total exports and imports weakened. In spite of that, with the share of 83.9% in total exports and 70.0% in total imports, the EU25 played a key role in the external trade of the Czech Republic. Higher shares of CIS countries, European transition economies and EFTA states in total exports were a favourable aspect. In imports, the shares of developing economies and other developed market economies ³ decreased; the position of CIS countries and other states strengthened significantly, of European transition economies moderately;
- the commodity structure of external trade flows saw a growth (but considerably differentiated) of exports and imports in all SITC sections. A highly above-the-average increase (which determined the dynamics of total exports) was observed only for exports of ‘machinery and transport equipment’, which strengthened their position in total exports from 50.5% to 52.5%. The remaining SITC sections recorded below-the-average increases, which weakened their share in total exports. An above-the-average growth of imports was recorded for ‘mineral fuels, lubricants and related materials’, but also for ‘machinery and transport equipment’. These sections of the SITC raised their share in total imports at the expense of all the other SITC sections.
 
The development of external trade in Q1-Q3 2006 was influenced by certain positive and negative factors:.
Among the positive factors were in particular:
- the continuing growth of industrial production. In January-August 2006, the industrial production index reached 111.3, of which the index of manufacturing was 112.3. The biggest year-on-year increase was registered for ‘manufacture of transport equipment’, followed by ‘manufacture of electrical and optical equipment’ and ‘manufacture of machinery and equipment n.e.c.‘ The growth of output in ‘manufacturing’ ⁴ had a decisive share in the year-on-year growth of total exports. In Q1-Q3 2006 exports of manufacturing industries stood at CZK 1 490.6 billion, which was by 13.2% (CZK +173.8 billion) more year-on-year, and their share in the year-on-year growth of total exports was 96.8%.
The most important item of exports of manufacturing industries was road vehicles (SITC 78), with a 20.6% year-on-year growth of exports. Exports of road vehicles made up 17.4% of total exports in Q1-Q3 2006 (16.3% in Q1-Q3 2005), of which exports of motor cars (SITC 781) accounted for 9.2% (8.0%) and exports of parts and accessories of the motor vehicles (SITC 784) for 7.0% (7.3%). Higher exports of ‘motor cars’ contributed with 18.5% to the increase of total exports, higher exports of ‘parts and accessories of the motor vehicles’ with 5.2%. Trade surplus in motor cars grew from CZK 76.9 billion in Q1-Q3 2005 to CZK 107.9 billion in Q1-Q3 2006 and trade surplus in ‘parts and accessories of the motor vehicles’ remained nearly the same (insignificant increase from CZK 42.2 billion to CZK 42.8 billion). Among other important items of mechanical engineering, a high growth (38.9%) was recorded for exports of ‘office machines and automatic data-processing machines’ (SITC 75), but the surplus in these products grew by only CZK 2.0 billion because also imports recorded a high increase, and for exports of ‘general industrial machinery and equipment, n.e.s.’ (SITC 74);
- the favourable economic development in the world and especially in the EU member states. According to the second estimate of Eurostat released on 11 October 2006, euro area and EU25 GDP grew by 2.7% and 2.9% respectively year-on-year in Q2 2006 (both +0.9% in Q2 2005). The GDP of the main EU trading partners – the United States and Japan was up by 3.5% and 2.5% respectively year-on-year in Q2 2006. The good EU figures were supported mainly by the economic growth in France, the United Kingdom and particularly in Germany, which produces nearly a third of the euro area GDP and which is the main trading partner of the Czech Republic.
 
The main negative effects were:
- unfavourable terms of trade ⁵. Export prices dropped by 1.5% in January-August 2006 compared with January-August 2005 and import prices were higher by 1.7% ⁶ in the same period. External trade prices were mainly influenced by the price development in the world market and by the strengthening of CZK against both EUR and USD. In January-September 2006, CZK appreciated by 5.3% on average against EUR and by 3.6% on average against USD, year-on-year. The world prices of industrial raw materials and food increased by 30.6% ⁷ in total in January-September 2006; their growth was strongly affected by increasing prices of petroleum and natural gas (+31.4% year-on-year in total). Just the higher prices of petroleum and natural gas had a negative impact on the trade balance and reduced trade surplus considerably. In Q1-Q3 2006 the trade deficit in ‘petroleum, petroleum products and related materials’ reached CZK 82.3 billion (up by CZK 18.6 billion year-on-year) and in ‘gas, natural and manufactured’ CZK 46.3 billion (up by CZK 13.3 billion year-on-year). A predominating influence (four-fifths) on the increase of trade deficit in ‘petroleum, petroleum products and related materials’ was the growth of prices. Approximately 97% of the increase of trade deficit in ‘gas, natural and manufactured’ is attributable to growth of prices;
- the continuing (for various reasons) growth of already high trade deficit with China (from CZK 57.3 billion to CZK 78.4 billion) and Russia (from CZK 50.7 billion to CZK 67.7 billion).
 
A closer look at external trade development in Q1-Q3 2006 shows that:
- exports to all the main groups of countries grew. Above-the-average dynamics were observed (excl. exports to the EU25 and developing economies) for exports to CIS countries, European transition economies, other states and other developed market economies. Almost four‑fifths of the absolute increase in total exports were (although the growth was below the average) attributable to a CZK 143.5 billion increase in exports to the EU25. Also exports to non-EU25 developed market economies (mainly Switzerland, Norway, Japan and Canada) developed favourably. The growth of exports to the EU25 reflected various dynamics of exports to individual EU25 countries. Exports to most of the countries grew above the average (e.g. to France, Belgium, Italy, Hungary, Sweden, Spain, Poland and the Netherlands), lower dynamics were recorded for exports to Slovakia, Germany (but the absolute growth of CZK 26.8 billion was among the highest ones) and Austria. As to further states, worth mentioning are higher exports to Russia, Ukraine, Romania and India;
- imports from all the main groups of countries were higher. Above-the-average increases were reported especially for imports from other states, European transition economies and CIS countries, whereas imports from the EU25, developed market economies and particularly from developing economies were below the average. The dynamics of imports from the EU25 were lower and varied considerably from one EU25 country to another, yet the absolute growth of imports amounting to CZK 101.3 billion accounted for nearly 58% of the growth of total imports. Highly above-the-average increases were recorded for imports from Poland, Hungary, France, Denmark, Finland, Portugal and the United Kingdom, average growth for imports from Slovakia, below-the-average increases were registered, e.g., for imports from Austria, Germany, Italy and the Netherlands, and a decrease was observed for imports from Sweden. As to further states, worth mentioning are higher imports from China, Russia, Norway, Romania, Japan, Azerbaijan and Taiwan, and lower imports from Ukraine;
- the external trade balance was a result of trade surplus with the EU25 (CZK 243.0 billion) and European transition economies (CZK 25.6 billion) on the one hand, and trade deficit with non-EU25 developed market economies (CZK 38.5 billion), developing economies (CZK 29.2 billion), CIS countries (CZK 78.7 billion) and other states (CZK 79.7 billion) on the other hand.
The trade surplus with the EU25 grew by CZK 42.2 billion and with European transition economies by CZK 3.6 billion year-on-year. Increases in deficit were registered for trade with developing economies (by CZK 4.4 billion), CIS countries (by CZK 18.4 billion) and other states (by CZK 21.2 billion). Surplus grew especially in trade with France, Belgium, the United Kingdom and Spain; a turn of the deficit into a surplus improved trade balance with Sweden and Italy; conversely, a turn of the surplus into a deficit worsened considerably the balance with Poland. As to further states, a high deficit (as mentioned above) occurred in trade with Russia and China, the deficit with Japan, Taiwan and Azerbaijan increased, and the balance with the United States and particularly with Ukraine improved.
 
Changes in the commodity structure of external trade flows in Q1-Q3 2006 compared with Q1‑Q3 2005 were noticeable in:
- machinery and transport equipment by a highly above-the-average growth of exports and hence by higher share of these exports in total exports. Higher exports by CZK 128.2 billion accounted for the 71.4% increase of total exports. Imports of machinery and transport equipment recorded an above-the-average growth and the highest absolute increase (CZK +74.4 billion) among all SITC sections, which strengthened the position of imports of machinery and transport equipment in total imports from 39.6% to 40.0%. Trade surplus in machinery and transport equipment reached CZK 210.2 billion (CZK +53.7 billion year-on-year). The growth of the surplus was mainly attributable to exports of ‘road vehicles’ and ‘general industrial machinery and equipment n.e.s.‘ Surplus in ‘road vehicles’ grew by CZK 30.4 billion and in ‘general industrial machinery and equipment n.e.s.’ by CZK 10.7 billion. The balance of trade in ‘other transport equipment’ improved (a turn of deficit CZK 8.6 billion into a CZK 4.5 billion surplus);
- manufactured goods classified chiefly by material by below-the-average dynamics of especially exports, but also imports, and hence by the weakening of their position in total exports (from 22.3% to 21.2%) and total imports (from 20.8 % to 20.6 %). Trade surplus in these goods decreased year-on-year (from CZK 27.3 billion to CZK 17.5 billion). This drop was mainly affected by the increase of trade deficit in ‘non-ferrous metals’ (from CZK 21.1 billion to CZK 33.1 billion);
- miscellaneous manufactured articles, commodities and transactions not classified elsewhere in the SITC by a moderate increase of surplus (from CZK 11.6 billion to CZK 12.6 billion) due to  higher growth of exports than imports. Trade surplus in ‘prefabricate buildings; sanitary, etc., fixtures, n.e.s.’ was up by CZK 3.7 billion and in ‘furniture and parts thereof’ by CZK 1.2 billion. Trade deficit in ‘articles of apparel and clothing accessories’ increased by CZK 1.7 billion;
- chemicals and related products by below-the-average dynamics of exports and imports. Trade deficit in these products grew by CZK 4.4 billion. The biggest deficit kept concentrating in ‘medicinal and pharmaceutical products’ (CZK 23.8 billion), but was by CZK 2.0 billion lower year-on-year. Trade deficit in ‘plastics in non-primary forms’ increased from CZK 9.1 billion to CZK 11.4 billion and in ‘plastics in primary forms’ from CZK 10.9 billion to CZK 11.9 billion;
- crude materials, inedible, and mineral fuels by the highest growth rate of imports among all SITC sections and below-the-average growth of exports. This trend, which was under the strong pressure of high mineral fuel prices, led to a year-on-year increase of trade deficit in these products by CZK 32.3 billion;
- agricultural and food crude materials and products by the lowest relative and absolute growth of exports among all SITC sections. The higher (yet below-the-average) growth rate of imports than exports showed itself in a deterioration of the passive balance (from CZK 17.6 billion to CZK 21.8 billion). In particular trade deficit in ‘meat and meat preparations’ and ‘tobacco and tobacco manufactures’ deteriorated (by CZK 0.8 billion and CZK 0.7 billion respectively), and trade surplus in ‘cereals and cereal preparations’ was down by CZK 1.8 billion. The highest deficit (CZK 12.9 billion) was concentrated in trade in ‘vegetables and fruit’.

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¹ China, North Korea, Cuba, Laos, Mongolia and Vietnam.
² The Commonwealth of Independent States.
³ Non-EU25 and non-EFTA states.
⁴ Items CZ-CPA 15 to CZ-CPA 36.
⁵ The import and export price indices in the CR are published later than data on external trade of the CR.
⁶ In the given period, exports were higher by 15.6% and imports by 13.7% (at constant prices).
⁷ See the World Price Indices of Industrial Raw Materials and Food in September 2006, CZSO, October 2006.