Czech industrial production growth strengthens to 6.7% y/y in Feb 2014, slightly above expectations

By bne IntelliNews April 7, 2014

Czech industrial production increased for the eighth straight month in February 2014 rising by 6.7% y/y, supported by an expanding auto sector, which is the backbone of the export-focused economy, data from the statistics office showed. The annual growth quickened from a revised 5.7% in January and was slightly above market expectations for a 6.4% rise according to a Dow Jones Business Wire poll.

The seasonally adjusted industrial production went up by 1.7% m/m in February following a 0.5% m/m drop in January.

The growth in February was mainly supported by car production that increased by 16.1% y/y, speeding up from a 15.5% y/y rise in the previous month. Other sectors that contributed the most to the annual hike were manufacture of fabricated metal products (contribution +0.8pps, growth by 9.6% y/y) and manufacture of rubber and plastic products (contribution +0.8pps, growth by 12.2% y/y). The steepest negative contribution of 0.4pps came from the production of machinery and equipment that registered a 5.1% annual drop.

Overall, the manufacturing industry expanded for the eighth month in a row in February with the annual growth quickening to 8.5% from 7.8% in January. The mining and quarrying industry shrank by 0.1% y/y in February, softening from a 1.1% decline in January. The annual decline in the utilities sector, likewise, eased to 0.8% from 2.1%.

Sales from industrial activity advanced by 11% y/y in the second month of 2014, faster than January’s rise of 8.5% and driven by a 16.1% hike in export sales. New industrial orders also strengthened their annual growth in February to 19.9% from 13.3% in January as foreign orders grew 23% y/y and domestic ones rose by 14.1% y/y.

IntelliNews comment: The eighth straight increase in Czech industrial output in February signals signs that the economy is gaining strength after exiting a record-long recession in 2013. 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.

One of the important forward-looking indicators, the purchasing managers index (PMI), also shows that the recovery is on track with the index staying above the 50-mark that signals expansion for the 11th consecutive month in February.

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