Czech Republic: Recession Continues to Linger

Consensus Forecasts

According to the preliminary estimate, the Czech economy contracted 1.9% (y-o-y) and 0.8% (q-o-q) in Q1, taking the recession into its sixth consecutive quarter. Growth in Q1 was hindered by sharply reduced investment and weak external demand. Exports fell another 7.1% (y-o-y) in March, after registering declines of 4.4% in the previous three months. Similarly, construction output dipped 19.0% and fell 10.7% in Q1, following a trend of contraction in every month of 2012. Industrial production disappointed, too, slipping by 6.0% in March, having dropped in the previous four months. Other indicators add to the depressing picture, with unemployment totalling 7.4% of the labour force in its latest reading, up from 7.0% in January, while retail sales contracted 3.3% in March, suggesting very little support to the recovery from domestic demand.

The manufacturing PMI inched higher in April to 49.5, from 49.1 in March, suggesting a move toward stabilisation despite a recent deterioration in manufacturing conditions in Germany, the country’s dominant trade partner. However, the PMI index has remained below the 50-point growth threshold for the thirteenth month running. President Milos Zeman has called for greater investment to support the recovery.

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