Cyrrus, Komercni Banka Expect Recovery In Household Consumption

Following the release of preliminary Q2 GDP data this morning, local sell-side desks flagged the potential for a recovery in household demand going forward, while warning of a potential deterioration in the condition of Czech industry.

• Cyrrus point out that the main drag on growth in 1H2023 was reduced household consumption, which was weighed on by weak consumer sentiment and a drop in real incomes. On the other hand, industrial activity supported the economy. In their view, a decrease in inflation coupled with wage growth should allow for a recovery in household consumption in 2H2023. However, the industry is running out of accumulated orders and receives fewer new ones. As a result, Cyrrus expect the economy to remain in stagnation in 2H2023 and are forecasting full-year growth of close to zero.
• Komercni bankawrite that economic stagnation continues, with GDP still falling short of its pre-pandemic level by 1%. They expect the economy to grow by 0.1% Y/Y this year, which should accelerate to +1.8% Y/Y next year. In their view, "although the overall GDP number for the second quarter does not look too optimistic, its structure is more encouraging." They see evidence that household consumption may have already bottomed out and believe that its recovery should be key for further economic recovery. However, they think that the risks are skewed to the downside, due to falling industrial demand and uncertainty about the recovery in household consumption.