Analysts shrug off sharp slowdown in Czech industrial production growth

By bne IntelliNews November 6, 2015

Czech industrial output increased for the tenth straight month in September, but at 0.6% y/y growth was the weakest in the run, according to data released by the statistics office on November 6.

The growth, coming after a 6.3% expansion in August, was well below market expectations of 3.4%. However, output was distorted by temporary shutdowns at several companies, including the Dukovany nuclear power plant and oil refiner and petrochemical producer Unipetrol. Working day effects also played a role, as the Czech Republic had one working day fewer in September than in the previous year.

Although significant, those temporary negative effects do not, for now, provoke concern, analysts at Erste suggest. Overall industrial production growth should remain solid driven by strong domestic demand, gradual recovery in some eurozone countries and investment expenditures financed by EU funds, they add.

“In the coming months, shutdowns will pose a risk for industrial production, but the fundamental economic story of solid domestic demand remains”, the analysts insist.

On a monthly basis, industrial output was 2.6% higher compared with August, when it had dropped 4.3% m/m. In the key manufacturing sector, growth eased to 2.9% y/y in September from 6.6% in the previous month. Auto production increased 9.8% y/y, to follow a 10.2% jump in August.

At the same time, growth in the mining and quarrying sector accelerated to 7.4%  from 6.1%. The utilities sector, however, shrank 18.7% in September, after expanding by 4.5% a month earlier.

New industrial orders ticked higher by 0.7%, continuing an upward trend that has been sustained for more than two years now. Across the first nine months of 2015, industrial production increased 4.6% y/y. Analysts at Erste see full-year growth at 4.7%.

In a separate report, the statistics office said construction output grew 2.4% y/y in September, easing from a 4.7% hike the month before.

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