Declining commodity prices secured a yoy increase in external trade

April?s external trade data did not come as a surprise. The surplus of CZK 19.9bn is just slightly above market expectations. Slower dynamics of external trade represent a negative surprise for us. Exports increased 5.8% yoy and imports 4.5%. This is lower than our forecast, and it also lags behind the results from previous months. The import figures were affected by the mineral oil balance, which decreased CZK 6.6bn, reflecting the strong yoy decrease of oil and other commodity prices. In contrast, the ex-commodity balance deteriorated. This is a sign of strengthening domestic demand as household consumption and especially investments are very import-intensive.

From a month-on-month perspective and after adjustment for seasonality and the different number of working days (SWDA), exports and imports recorded significant drops. Both figures are a correction of the solid results from the previous months. Exports according to the national methodology decreased 1.9% mom, and imports fell even 4.4%, leading to a mom increase in the external trade balance by almost CZK 7bn to CZK 16.1bn.

According to the CSO and in year-on-year terms, the total balance in the national concept was favourably influenced mainly by a decrease in the deficit in 'mineral fuels, lubricants and related materials' of CZK 6.6bn and 'chemicals and related products' CZK 1.1bn; and an increase in the surplus in 'crude materials, inedible, except fuels' of CZK 0.8bn. On the other hand, a decrease in the surplus in 'machinery and transport equipment' of CZK 1.7bn, 'manufactured goods classified chiefly by material' CZK 1.2bn and 'miscellaneous manufactured articles' CZK 1.0 bn affected the total trade balance negatively.



The fresh economic outlook of SG economist expects a slightly stronger recovery in the euro area. It was partly confirmed in today?s reading of German external trade statistics, which surprised with strong growth of exports. It was the third month in a row with such a solid result. In contrast, imports proved weak with a mom decrease. This is mixed news for Czech exporters as they are subcontractors for German exporters, but their products end also in German households. Nominal exports of goods should be around 8% higher this year. Imports are pushed higher by the high import intensity of Czech exports. But strengthening domestic demand is another factor pushing imports higher (we estimate import intensity at 35% for household consumption and around 80% for fixed investments). The downward pressure stems from lower oil prices, leading to an improvement in the commodity balance of more than CZK 50bn this year, while the ex-commodity balance should deteriorate CZK 78.1bn. Therefore, we expect the overall external trade surplus to decline CZK 25.5bn this year to CZK 128.6bn. Net exports should contribute negatively to this year?s GDP growth, by 0.6pp.

Autor: Viktor Zeisel