Czech industrial production rebounded in July 2013 adding to signs that the economy that has just exited a record-long recession is on track to recovery, data from the statistics office showed on Sept 6. The output rose by 2.1% y/y in July, following a revised drop of 4.9% in the previous month. Analysts polled by Reuters had predicted a 20% y/y growth.

The seasonally adjusted industrial production went up by 0.4% m/m in July. In working day-adjusted terms, the reading posted a 2.8% annual fall. There were two more working days in July than in the same month of the previous year.

The sectors that contributed the most to the annual growth in July were manufacture of fabricated metal products (contribution +1.0pp, growth by 11.2% y/y), manufacture of machinery and equipment (contribution +0.7pps, growth by 8.3% y/y) and manufacture of rubber and plastic products (contribution +0.5pps, growth by 8.0% y/y. While production decreased most significantly in electricity, gas, steam and air conditioning supply (contribution -0.8pps, drop by 5.9% y/y), mining and quarrying (contribution -0.5 pps, drop by 11.2% y/y) and manufacture of motor vehicles, trailers and semi-trailers (contribution -0.4% pps, drop by 2.7% y/y).

Overall, production in the manufacturing industry grew by 4.1% y/y in July, after a 4% y/y fall in June. The annual drop in mining and quarrying industry eased to 11.2% from 21.2% and the sector of electricity, gas, steam and air conditioning supply contracted by 5.9% y/y in July, following a revised 5.3% fall in the previous month.

Sales from industrial activity advanced by 3.7% y/y in July, reversing from a revised 5% y/y decrease in June. After shrinking for two straight months, new industrial orders posted a strong 9% rise in July as both domestic and foreign orders increased – by 6.6% y/y and 10.2% y/y, respectively.

IntelliNews comment: Czech industrial output in July posted the first improvement since the start of the year as the figure decreased in each month of the year with the exception of April when it posted a zero growth. The July reading suggests that the economy is on track to recovery after in Q2 it grew for the first time in seven quarters. The recently announced July retail sales that grew more than expected also point in that direction. One of the important forward-looking indicators, the purchasing managers index (PMI), also gives hopes for a recovery with the index showing the best overall improvement in business conditions in the country in five months in August thanks to rising new orders.