According to the second estimate of the statistical office, Czech GDP increased 0.4% qoq in the last quarter of 2016. Thus statisticians revised the dynamics 0.2pp higher. The increase thus corresponds now to growth in Germany and Hungary. The qoq dynamics were mainly contributed to by net exports (contribution +1.1pp) and private consumption (+0.3pp). On the other hand, the main drag was inventory built, which cut 0.8pp, and investment also acted negatively (-0.2pp). A slight decrease was also recorded by government expenditures. It is thus apparent that inventories are behind slow growth. However, the one-off slump does not mean that economic fundamentals have deteriorated.
From a yoy perspective, the economy increased 1.9%. The vast majority of growth is thanks to private consumption and net exports. Investment dynamics were the biggest drag, which slumped as the 2007-2013 EU funds programming period ended and the beginning of the new programming period is only sluggish.
Forward-looking indicators such as PMI and confidence measured by the CZSO show a sound performance of the Czech economy. Moreover, the main Czech trading partners have printed decent growth figures. Our view is thus that weak growth figures from the second half of 2016 represent only a temporary period and GDP dynamics will accelerate at the beginning of this year. Qoq growth might even surpass 1%.
For the whole of 2016, the economy added only 2.3%. The dynamics were impeded mainly by declining investment activity. In contrast, growth was supported by private consumption and an increasing external trade balance. GDP should increase 2.7% this year, according to our forecast. Private consumption will remain the main driver and should be joined by reviving investment activity in the second half of the year. The net export contribution should become smaller.