Czech industrial production increased for the 12th straight month in June 2014 and at a faster rate than in May helped by a stronger growth in the key automotive sector. Industrial production grew by 8.1% y/y in June, quickening from a 2.5% hike the month before, data from the statistics office showed on August 6. The reading was a touch above market expectations for an 8% y/y rise.

In seasonally adjusted terms, the output was up by 0.1% from May when it shrank by 1.5% m/m.

The auto manufacturing sector continued to be the main growth driver expanding by 15.1% y/y in June, faster than May’s rise of 11.9% y/y. Other sectors that contributed the most to the annual hike were manufacture of electrical equipment (contribution +1.2pps, growth by 17.4% y/y) and manufacture of rubber and plastic products (contribution +0.9 pps, growth by 13% y/y).

Overall, the manufacturing industry posted a 10.1% y/y growth in June, much stronger than in May when production grew by 4.1% y/y. Production in the mining and quarrying industry, on the other hand, continued to contract in June going down by 2.7% y/y and following a 6.4% fall in May. The utilities sector also contracted for the second straight month with the decline softening to 2.7% y/y in June from 5.4% y/y in May.

In the first six months of 2014, Czech industrial production grew by 6.4% y/y.

Sales from industrial activity advanced by 13% y/y, the fastest annual rate in over three years. The growth in new industrial orders returned to double-digit figures registering a 15.8% y/y hike in June, after an 8.7% y/y rise in May.

IntelliNews comment: The 12th straight increase in Czech industrial output in June 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. 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. In the longer-term the automotive sector will see the entry of South Korean tyre maker Nexen that plans to invest CZK 22.8bn to build a plant in the country. South Korean car parts maker Hyundai Mobis also said it will invest in a new Czech plant.

One of the important forward-looking indicators, the Czech purchasing managers index (PMI), also showed that recovery is taking root with the index staying above the 50-point mark that signals expansion in the sector for the 15th straight month in July.