Central Europe staves off fears with robust growth in third quarter

By bne IntelliNews November 14, 2014

bne -

 
Preliminary GDP data for the third quarter released on November 14 showed that Central Europe continues to grow robustly, staving off fears that Eurozone weakness would infect the region, and keeping calls for more monetary easing at bay for now.
 
Just ahead of the results out of Central Europe, Germany offered a fillip as the country's statistics office announced it had narrowly avoided recession with growth of 0.1% in July-September. German consumers increased spending strongly and exports also rose, the data service said.
 
Concern has been swirling that the economy - the major driver of export demand for Central Europe - could replicate the 0.1% contraction it saw in the second quarter. Dropping industrial production and inflation has spooked the region. While the effects of the Ukraine crisis and stand-off with Russia has had little direct effect in CE because of limited trade links, the sanctions and threat of wider conflict have hit confidence.
 
The hope now is that the worst is over. Overall the trend in Central European GDP data "match[es] what PMIs have told us about [the third quarter] already," suggested analysts at Commerzbank. "It was a geo-politically challenged time, and things have looked up, at least slightly from then, which will help [quarter four] data." 
 
Helped by the central bank's suppression of the currency, the Czech Republic has led the region in terms of forward looking data. However, GDP growth came in below expectations of 2.5%, finishing the quarter at 2.3% year-on-year. On a quarterly basis, the economy expanded 0.3%, with manufacturing in the driving seat, and domestic demand taking on more responsibility as exports lull.
 
While the number was "disappointing", note analysts at Erste, they suggest it will not push the central bank to add more weight to its unconventional policy. "GDP growth above 2% does not imply any need to change the EUR/CZK floor," they write.
 
In contrast, Hungary outgunned the analysts, who had suggested the state-driven recovery could sag by as much as 1 percentage point compared with a very strong second quarter, with dropping domestic demand and tightened fiscal spending to add to the drag from Eurozone demand. That had expectations down to 2.9%; however, the third quarter booked an annual rise of 3.2%, or 0.5% quarter on quarter, according to the flash data.
 
The biggest relief  however came in Poland. Recent deflation and poor PMI figures had  analysts suggesting the second quarter's 3.5% growth would slow to 2.8%. However, the economy pushed higher than any dared hope, expanding 3.3%, or a 0.9% quarter on quarter. The result should enable the central bank to shrug off increasing calls from the market for it to return to monetary easing in a bid to stave off deflation, with rate setters signalling earlier this month that growth is now the focus.

Related Articles

UK demands for EU reform provoke fury in Visegrad

bne IntelliNews - The Visegrad states raised a chorus of objection on November 10 as the UK prime minister demanded his country's welfare system be allowed to discriminate between EU citizens. The ... more

Czech food producer Hame seen next on the menu for Chinese giant

bne IntelliNews - Following a smorgasbord of acquisitions in late summer, China Energy Company Limited (CEFC) is eyeing yet another small Czech purchase, with food ... more

INTERVIEW: Babis slams coalition partners, but Czech govt seems safe for now

Benjamin Cunningham in Prague - Even as the Czech governing coalition remains in place and broadly popular, tensions between Prime Minister Bohuslav Sobotka and Finance Minister Andrej Babis remain ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss