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Statistical Office released today flash GDP estimate for 3Q 2006. Despite that our estimate was the largest out of all banks (7.1% vs 6.8% market average) the reality outpaced all our expectations. The economy grew by real 9.8%!

The SO did not provide growth structure and therefore we can just speculate on the source of growth. The whole problem lies in imports that are blurred with high oil prices, investment imports and stock building of goods for intermediate consumption. Therefore, the imports that are important from GDP point of view (consumption goods and intermediate goods actually used for production) should not be very high. From production side, SO says that the value added in industry and amount of taxes on goods had increased. The tax collection is favorable in 2006 but we do not see reasons why it should boost GDP. This leaves open a question whether we can expect similar growth number in 4Q2006.
From monetary point of view, these data do not necessary call for change in policy. The high GDP is a result of high industrial activity what does not endanger inflation outlook. We stick to our estimate of 25 bps hike in November meeting.

source: TatraBanka