Czech industrial production increased for the sixth straight month in December 2013 and at its fastest pace in 31 months thanks mainly to the expanding auto sector. The output rose by 9.3% y/y in December, following a hike of 6.2% in November, data from the statistics office showed. The reading was in line with market expectations.

The seasonally adjusted industrial production, however, went down by 0.3% m/m in December, after a 1.3% m/m rise the month before. In working day-adjusted terms, the output posted a 6.7% annual growth. December 2013 had one working day more than in the same month of the previous year.

The growth in December was mainly supported by car production that increased by 17.8% y/y, following a 13.7% expansion in the previous month. Other sectors that contributed the most to the annual hike in December were manufacture of machinery and equipment (contribution +1.5pps; growth by 16.1% y/y) and manufacture of other transport equipment (contribution +1.1 pp, growth by 59.9% y/y). Industrial production declined the most in manufacture of leather and related products (contribution -0.02 pps, drop by 11.2% y/y) and in electricity, gas, steam, and air conditioning supply (contribution -0.08 pps, drop by 0.5% y/y).

Overall, the manufacturing industry expanded for the sixth month in a row in December growing by 11.8% y/y, faster than November’s rise of 6.8%. The mining and quarrying industry posted a 1.8% y/y expansion, the first in 17 months, while the utilities sector shrank by 0.5% y/y, following a 7.6% y/y hike in November.

Sales from industrial activity advanced by 10.6% in the last month of 2013 after expanding by 5.6% y/y a month earlier. New industrial orders also improved for the sixth consecutive month in December posting a 20.5% annual rise as both domestic and foreign orders increased – by 7.7% y/y and 28.3% y/y, respectively.

In full-2013 Czech industrial production edged up by 0.5% from 2012 when it shrank by 1.2%.

IntelliNews comment: The sixth straight increase in Czech industrial output in December adds to signs that the economy is heading towards recovery after exiting a record-long recession in mid-2013. Rising new orders are a positive sign that the sector will continue improving in the next months driven by growing foreign demand. In December orders from  abroad increased at the strongest pace since August 2004. One of the important forward-looking indicators, the purchasing managers index (PMI), also indicates that the recovery is on track with the index staying above the 50-mark that signals expansion for the ninth consecutive month in January.