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.