Germany, the key market for Czech businesses, has reported economic growth of 0.3%, and France has announced the same surprising figure. Performance of the German economy was boosted by household consumption, government expenditures and investment in construction.
“We are at the beginning of a change for the better. The recession is over. Czech companies can expect a new inflow of orders to come,” said David Marek, analyst with Patria Finance.
Experts will also revise their forecasts regarding the number of people who lose their jobs. Marek said the unemployment rate for the first quarter of next year would definitely not exceed the anticipated 10%. Czech gross domestic product dropped by 4.9% year-on-year in the second quarter of 2009, but rose by 0.3% against the previous quarter, according to a preliminary estimate the Czech Statistical Office released on Friday.
It is not only the German and French figures which come as a surprise. Analysts had predicted a bigger slowdown in the European Union economy and in the eurozone. The EU’s second-quarter gross domestic product was 0.3% lower compared with the previous quarter, and eurozone’s dipped by 0.1%. “The recession has ended, and it has ended sooner than we thought,” said Andreas Rees, analyst at UniCredit.
Despite the current enthusiasm, economists call for caution. A monthly report by the European Central Bank, released Thursday, describes current risks as still high. Experts have concluded from the report that more forecast revisions will be necessary.
The return to growth in Germany after a year-long break is good news for the Czech Republic. Mirjam Schwan of the Czech-German Chamber of Commerce and Industry said the development in German industry, where the number of orders has been growing since May, was a positive signal for the Czech Republic. Data on Czech industrial output confirms a certain improvement, she added.
Schwan said, however, that the new EU data did not necessarily mean the end of the recession. It is very hard to predict whether it is a long-term trend or a short-term improvement, she added.
Josef Hladík, board chairman of the Association of Czech Companies in Germany, also warned against exaggerated expectations regarding the effect of the German data on the Czech economy.
“The effect of the German improvement will be delayed in the Czech Republic. The idle capacity in German companies is an obstacle. More than a million employees were working part time, and costly machines and equipment did not generate profits. The only Czech companies that will feel a recovery are those which are a direct part of German production processes,” he said.
The Czech Chamber of Commerce is somewhat optimistic, pointing to the latest industrial output indicators in the Czech Republic and in the EU. The chamber says the worst is over for businesses and their employees. “We believe that it is a long-term trend, which should be confirmed in the coming months,” chamber president Petr Kužel said.