Czech industrial output decreased for the second straight month in June 2013 and at a deeper than expected pace mainly due to a drop in mining and production of electronics, data from the statistics office showed. The output fell by 5.3% y/y in June, following a 2.2% y/y drop in the previous month. The floods that hit the country in early June also weighed on the reading causing a 0.2pps decrease. Analysts polled by Reuters had predicted a 2.8% y/y slump.

The seasonally adjusted industrial production went down by 0.9% m/m in June after rising by 0.7% m/m in May.

The sectors that contributed the most to the annual drop in June were mining and quarrying (contribution -1pp, drop of 21.2% y/y), manufacture of electrical equipment (contribution -0.8pps, drop of 11% y/y) and manufacture of machinery and equipment (contribution -0.6pps, drop of 6.7% y/y).

Production increased the most in manufacture of other transport equipment (contribution +0.4pps, rise of 22.7% y/y) and in manufacture of pharmaceutical products (contribution +0.1pp, rise of 10% y/y).

Overall, production in the manufacturing industry shrank by 4.5% y/y in June after a 1.3% y/y fall in May. The annual drop in mining and quarrying industry, on the other hand, eased to 21.2% from 25.3%. The sector of electricity, gas, steam and air conditioning supply contracted by 4.9% y/y in June, following a 1.5% growth in the previous month.

Sales from industrial activity went down by 4.3% y/y in the sixth month of 2013, much deeper than May’s drop of 0.5%.

New industrial orders fell for the second month in a row in June albeit at the weaker pace of 0.8% y/y than the 6.1% slump in May. The drop in June came as orders from abroad fell by 1.6%, while domestic orders edged up by 0.6%.

IntelliNews comment: With the exception of April, Czech industrial output decreased in each month of 2013 suggesting that the economy is far from exiting its longest recession on record. The recently announced June retail sales that also showed a deeper than expected drop indicate that weak consumer demand, which has been the main drag on growth in 2012, continue to weigh on the economy. Yet, rising new domestic business is a positive sign. One of the important forward-looking indicators, the purchasing managers index (PMI), also gives hopes for a rebound with the index showing the best overall improvement in business conditions in the country in four months in July thanks to rising new orders.