Czech industrial production rises more than expected in March 2014 on auto sector

By bne IntelliNews May 7, 2014

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 12th consecutive month in April.

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