The Czech Statistical Office confirmed today that the economy increased 0.4% qoq in the final quarter of 2016. This is an acceleration compared with 3Q, but it contrasts with the higher figures reported in Poland and Slovakia. The weak results are due to a drop in government consumption and capital formation, though today’s revision showed that the decline was not as pronounced as previously indicated. On the other hand, household consumption has reported decent increases for a longer period, while the biggest contribution was provided by external trade. In yoy terms, the economy added 1.9%.
Poor capital formation is mainly due to the government. On the other hand, non-financial corporations exploit their favourable situation and invest. The statistical base effects play a big role in both. When we look at the usage of capital, we see the decline occurred mainly due to ‘other buildings’, which consists of infrastructure construction, and transport equipment. The base effects play a role here, as well, as they show the level of inflation of investment activity in 2015.
Today’s figures from the sector accounts confirmed that corporations’ profit margins have been declining as businesses are forced to offer higher wages at their expense. The savings rate after seasonal adjustment decreases, according to our calculation, and shows consumers’ increased appetite.
We assume that in the first quarter of this year, the economy rapidly accelerated. This is suggested by the good results in industry as well as sound forward-looking indicators. For the whole year, we expect growth of 2.7%.