Czech industrial output increased just 0.7% y/y in December, easing sharply from 5.7% a month earlier, data released by the statistics office showed on February 8.
Although the reading extended an upward trend that has now lasted 13 months, the reading in December was the weakest since the start of the sequence. The result was a huge disappointment to a market that anticipated growth would accelerate to 5.9% in the final month of 2015.
Temporary shutdowns at several companies, including the Dukovany nuclear power plant and oil refiner and petrochemical producer Unipetrol, weighed on industrial production, although those issues have been affecting the data for some months. Additionally, the end-year company holiday season also played a role.
“We see the negative surprise as being the result of greater taking of company holidays and the significant non-cyclical volatility presented in the data," analysts at Erste write. "More concretely, industrial output has become relatively volatile recently, despite the stability of the Czech business cycle, positive sentiment of entrepreneurs and households and manufacturing PMI significantly above 50 points."
Seasonally-adjusted output was 2.6% lower than in November, when it had shrunk 1.2%. In the key manufacturing sector, growth decelerated to 1.1% from 7.4%, mainly on the back of a slowdown in the auto sector and falling output in the manufacture of machinery and other transport equipment. Production in the utilities sector dropped 1.7%, to follow a 1.5% decline the previous month.
Mining and quarrying was one of the few sectors to see an increase, with output growing 1.7%. The statistics office reported that construction output increased 3.4% y/y in December, accelerating from 1.3% in November. Across the whole of 2015, Czech construction output grew 5.5%, after a 4.3% advance seen in 2014.
Industrial production across the whole of 2015 registered 4.4% growth, weaker than the 5% hike the previous year. The dynamic is likely to continue easing this year, mainly due to lower public investment associated with EU funds.
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