Gross domestic product - 3. quarter of 2004

According to preliminary estimates GDP increased in Q3 2004 by 3.6% at constant prices or by 3.5% after seasonal adjustment, all year-on-year . Compared to Q3 2003 the working time availability was three days less. In comparison with Q2 2004 , seasonally adjusted GDP was by 0.8% up . Over Q1 to Q3 2004 , GDP grew by 3.7% year-on-year. The preliminary GDP growth estimate of 10 September 2004 (+4.1%) has been updated to 3.9%, while that for Q1 2004 (+3.5%) remains unchanged. At the same time the quarterly estimates for 2003 have been adjusted and reconciled with figures of preliminary annual accounts for the same year.
As in Q2 2004, the year-on-year growth of capital expenditure continued to outstrip that of final consumption noticeably in Q3, too. While final consumption expenditure stagnated in Q3 2004 in real terms (-0.3%), fixed capital formation expenditure maintained its growth rate (+9.7%), after its considerable growth in the previous two quarters.
Year-on-year development of GDP expenditure components in Q3:

• The development of final consumption expenditure at constant prices differed in households and non-profit institutions from that in general government. The expenditure of households increased by 2.0% in real terms. The year-on-year growth rate of expenditure of households has been incessantly dropping since Q3 2003. At current prices, households spent by CZK 17.5 billion (+5.3%) more than last year. The largest year-on-year increases were recorded for purchases of food and tobacco products and for expenditure on holiday packages and recreational services. The current price expenditure growth was affected by increases in VAT on services and in consumer tax on cigarettes (harmonization with the EU); food prices also increased. Expenditure on recreation also grew at constant prices due to the rising demand fuelled, among other things, by the exchange rate appreciating in this quarter. Nominally, final consumption expenditure of households grew faster than their disposable income by 1.0 percentage point. General government expenditure decreased by 5.5% in real terms, first of all due to savings in expenditure on material, repair and maintenance.
• Expenditure on gross capital formation significantly increased again. At current prices, gross fixed capital formation increased by CZK 19.6 billion, especially due to the continued investment in transport infrastructure, production and non-production capacities of foreign investors and housing construction. Changes in inventories were only 78.0% of inventories in the corresponding quarter of 2003.
• External balance of goods and services in total was influenced by the dynamic development of its two components – exports and imports at current prices were by CZK 100.3 billion (+25.6%) and CZK 85.8 billion (+21.1%) higher than in Q3 2003. Exports were growing faster at both constant and current prices, terms of trade being improved (deflators of exports grew by 2.4% and of imports by 1.5% year-on-year). Trade balance stood at -CZK 5.0 billion at current prices or at -CZK 7.2 billion at the previous year’s prices.
• As far as industries are concerned, agriculture with its year-on-year growth of gross value added by 12.4% at constant prices (resulting from the low values in Q3 2003 and this year’s favourable harvest) did best. However, the largest contributions to the annual growth of value added in total (+2.8%, year-on-year, constant prices) were made by increases in value added in industry (+5.9%), financial intermediation and business services (+3.8%) and trade plus transport (+3.3%). Construction and selected, mostly non-market services rendered mainly by the general government sector remained under their last year’s level.

At current prices , GDP grew in Q3 by CZK 54.6 billion (+8.4%) year-on-year. The aggregate price level measured by the implicit deflator of GDP was by 4.7% up on the corresponding period of 2003. The value of GDP produced over Q1 to Q3 was CZK 2 053.8 billion – a year-on-year increase of 7.8%.
The CZSO finished its major revision of the time series of annual national accounts for the years 1995 to 2002 and processed a preliminary sequence of annual national accounts for the year 2003. The data were placed on the CZSO’s website on 3 December 2004. In line with its policy of revisions, the CZSO reconciled the quarterly estimates of GDP for 2003 with more accurate data of annual national accounts. And the complete time series of quarterly accounts, including seasonally adjusted indicators, was placed on the CZSO’s website on 10 December 2004.

The reconciliation of the quarterly national accounts for 2003 with data from the preliminary annual national accounts for the same year raised the estimate of the GDP growth rate at constant prices in the quarterly national accounts for 2003 from 3.1% to 3.7%. Essentially, the increase in the GDP growth rate results from refinement of the estimate at current prices. On the other hand, more accurate conversion into the previous year’s prices (constant prices of 2002) slightly slackened the rate because influences of more accurate conversions of the individual GDP use components virtually compensated each other. The increase in the GDP estimate at current prices was primarily due to refinement of the estimate of final consumption expenditures of households (first of all of high-income-brackets ones) by CZK 10.7 billion (0.8%) and higher final consumption expenditure of general government (by CZK 9.8 billion, +1.6%) resulting from more accurate calculation of fixed capital consumption.

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Note
Contact: Jan Heller, telephone (+420) 274 052 865, e-mail jan.heller@csu.gov.cz
Related publications: 5001-04 Quarterly National Accounts of the Czech Republic: 3rd quarter of 2004