Czech, Hungarian and Polish GDP details point to strong rebound in investment demand

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Czech, Hungarian and Polish GDP details point to strong rebound in investment demand in the 3rd quarter of 2014

This morning, Czech and Polish statistical offices brought GDP details for the third quarter of 2014, which showed that both economies grew strongly mainly thanks to strong rebound in investment activity and visible recovery in households’ consumption. That’s a positive signal for the future, because recovery is not just based on exports’ performance. Released details have also slightly hawkish implications for both CNB’s and mainly NBP’s policy.

Meanwhile the Hungarian statistical office has released figures about investments and their deep details. They increased by 16.3% Y/Y in 3Q14 down from 21.2% Y/Y in 2Q14 and 22.6% Y/Y in 1Q14, so the figure confirms our view that investment is slowing in Hungary. But we have to highlight that there was a growth in 15 subgroups from the 19 subgroups, so there are investment in a wide scale.

The public investments showed an outstanding performance with its 36.8% Y/Y level, which was represented mainly in the transportation and storage area (railway, road way construction, new vehicle purchase etc.). There was huge investment in sewerage and water cleaning systems and the government renewed lots of parks, public institutions.

The private sector investment slowed substantially 23.8% Y/Y in 2Q14 to 11.8% Y/Y in 3Q14. The vehicle manufacturing companies and its suppliers (rubber and plastic, electronic and optic products production) are still the main drivers of the investments in the private sector.

The sectors, where investments dropped were financial and insurance activities by 25.2% Y/Y, electricity, gas, steam and air conditioning supply by 5.1% Y/Y and agriculture by 3.5% Y/Y.

Thus, the investment figure confirms our expectation that investment provided the highest contribution to the Hungarian GDP growth in 3Q14 again just like in the previous two quarters. Looking ahead, the public investment may decelerate substantially in the following months as Hungary is over the all the elections and the EU funds money usage may slow down also because of the new 6 years EU budgetary period. The latter may have a negative effect on the private investments as well. So we expect that investment growth may slow down to around 10% Y/Y level in the coming quarters.