Strong production, new orders and expanded export sales meant Czech manufacturing business sentiment improved more than expected in September, the latest Markit Manufacturing Purchasing Managers' Index (PMI) data showed on October 2.

Czechia’s headline PMI score rose to 56.6 in September from 54.9 in August, IHS Markit research showed. The 50-point threshold divides expansion from contraction. A Reuters forecast of analysts anticipated a reading of 55.4 points.

The reading in July was 52.0 points and the latest survey data signalled the strongest improvement in business conditions in the manufacturing sector since April; thus Czech manufacturing enjoyed a strong summer.

In its release on the results, IHS Markit said: “Sustained growth was reflected in accelerated backlog accumulation and further job creation. On the price front, cost burdens rose sharply and output price inflation reached a four-month high.”

It added: “Although the PMI average for the third quarter was the lowest of the year so far, it indicated a solid overall expansion nonetheless. Production levels in the Czech manufacturing sector rose at a steep pace in September, with the rate of growth accelerating from August’s eight-month low. Panellists linked higher output to strong client demand.”

New orders received by goods producers continued to increase in September, rising at the fastest pace since May, added IHS Markit. “The upturn was commonly attributed to larger order volumes from domestic and foreign clients, with new export growth reaching a five-month high. In line with the strong expansion in new orders, backlog accumulation accelerated in September. The level of outstanding business rose at a solid rate that was the fastest since June.”

On the downside, the latest PMI data showed the pace of job creation in Czechia eased to the weakest since last October. Although capacity constraints were cited, vacancies were sometimes left unfilled as firms struggled to find suitable candidates. “Cost burdens faced by Czech manufacturers continued to rise in September, with input price inflation reaching a five-month high,” said IHS Markit. “Panellists stated that higher input costs were partly due to input shortages among suppliers. And with supplier capacity constraints becoming more apparent, goods producers increased buying levels in order to build safety stocks.”

After assessing the data, Capital Economics said in a press release: “The September PMIs for Central Europe, released today, rose throughout the region. Our weighted average PMI for Central Europe (compiled from the surveys for Poland, Hungary and the Czech Republic) picked up from 53.8 to 55.3 – the second-best outturn of 2017. This reading is consistent with industrial production growth of around 8% y/y.”