Czech industrial production increased for the ninth straight month in March 2014 rising by 8.7% 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 6.7% in February and exceeded market expectations for a 8% rise.

The seasonally adjusted industrial production edged up by 0.3% m/m in March, easing from a 1.7% m/m hike the month before.

The growth in March was mainly supported by car production that expanded at the fastest pace in seven months going up by 26.3% y/y and following a 16.1% rise in February. Other sectors that contributed the most to the annual hike were manufacture of fabricated metal products (contribution +1.2pps, growth by 13.7% y/y) and manufacture of other non-metallic mineral products (contribution +0.8pps; growth by 23.1% y/y). The steepest negative contribution of 0.3pps came from electricity, gas, steam and air conditioning supply that that registered a 2.2% annual drop.

Overall, the manufacturing industry expanded for the ninth month in a row in March with the annual growth quickening to 11% from 8.5% in February. After contracting for two straight months, the mining and quarrying industry expanded by 5.9% y/y in March. The annual decline in the utilities sector deepened to 2.2% from 0.8%.

Industrial production grew by 7.1% y/y in the first three months of 2014.

Sales from industrial activity advanced by 11.8% in March, slightly above February’s rise of 11% y/y and driven by a 19.8% hike in export sales. New industrial orders continued to grow at a double-digit pace albeit weakening to 16.6% y/y in March from 19.9% y/y in February on a softer growth in orders from abroad.

IntelliNews comment: The ninth straight increase in Czech industrial output in March signals that the economy is gaining strength after exiting a record-long recession in 2013 and is on track to return to 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.

One of the important forward-looking indicators, the purchasing managers index (PMI), also shows that the recovery is gaining ground with the index staying above the 50-mark that signals expansion for the 12^th consecutive month in April.