Czech industrial production increased for the tenth straight month in April 2014 although at a weaker but still sound annual pace supported by an expanding auto sector, which is the backbone of the export-focused economy, data from the statistics office showed. The annual growth eased to 7.7% in April from a revised 8.4% hike the month before. 

The seasonally adjusted industrial production was 1% higher than in March when it edged up by 0.3% m/m.

The growth in April was mainly supported by car production that expanded by 16.5% y/y in April, cooling from an over 2.5-year high of 26.1% in March. Other sectors that contributed the most to the annual hike were manufacture of electrical equipment (contribution +0.8pps, growth by 11.6% y/y) and manufacture of fabricated metal products (contribution +0.5pps; growth by 6.2% y/y). The steepest negative contribution came from printing and reproduction of recorded media that that registered a 4.9% annual drop.

Overall, the manufacturing industry also expanded for the tenth month in a row in April with the annual growth slowing to 8.4% from 11.1% in March. The yearly expansion of the mining and quarrying industry, on the other hand, strengthened to 9.8% from 5.9%. The utilities sector grew by 2.5% y/y ending a four-month declining streak.

In the first four months of 2014, Czech industrial production grew by 7% y/y.

Sales from industrial activity advanced 10.3% y/y in April, broadly the same as in March, driven by a 14.8% hike in export sales. New industrial orders continued to grow at a double-digit pace albeit weakening to 14.7% y/y in April from 16.4% y/y in March on a softer growth in orders from abroad.

IntelliNews comment: The tenth straight increase in Czech industrial output in April signals that the economy is gaining strength after exiting a record-long recession in 2013 and is on track to return to a full-year growth in 2014. Last year Czech industrial production edged up by 0.5% from 2012 when it shrank by 1.2%. Rising new orders are a positive sign that the sector will continue improving in the next months driven by growing foreign demand. Foreign orders have been rising at a double-digit annual pace since July 2013. The growth should be supported by rising auto production with the country being home to plants run by Volkswagen’s Skoda Auto, South Korea’s Hyundai and Toyota Peugeot Citroen Automobile Czech (TPCA), jointly owned by Toyota and Peugeot Citroen. Both Skoda and TPCA have announced plans to boost production as they introduce new models on the market.

One of the important forward-looking indicators, the Czech purchasing managers index (PMI), also shows that the recovery is taking root with the index rising to more than a three-year high in May.