Friday, July 04, 2008

Czech Exports Slow in May

Czech exports stagnated in May, after clocking in a 13 percent year on year increase in April, a sign that the twin effect of the rise in the koruna and faltering demand in Western Europe is now beginning to hurt exporters. Imports fell 2 percent from a year ago, contributing to a trade surplus of 9.2 billion koruna ($609 million). This surplus compares with 8.3 billion koruna one in April, and a 5.3 billion koruna a year ago.

The strange form the imports line adopts would seem to me to be more a consequence of the early calendar date of Easter this year than anything else. Demand for Czech goods in Western Europe is now waning as hedging contracts against the Koruna rise expire and the euro region economy, which is the Czech Republics key trading partner, visibly entering a slowdown.

The koruna has been the world's best-performing currency so far this year, and advanced 13 percent against the euro in the 12 months through May (and was 30.5 percent stronger against the dollar). This sustained appreciation gradually makes exporting more difficult and reduces the chances that we will see a fourth record full-year trade surplus in 2008.

May exports of 205.2 billion koruna, the lowest this year, were unchanged from a year ago. Exports were fueled by a 2.5 percent increase in exports of telecommunication equipment, computers and cars.

Imports fell to 196 billion koruna, also the lowest so far in 2008, which may indicate that companies are cutting back on investments, economists said. The koruna advance also lowers the value of imports in the domestic currency and the slowest household spending in 2 1/2 years dents imports for consumption.

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