Czech PMI dropped to its lowest level since August 2016

Czech PMI dropped to its lowest level since August 2016
Czech manufacturing PMI falls to 51.8 in November, its weakest level in two years
By bne IntelliNews December 4, 2018

The Czech IHS Manufacturing Purchasing Managers Index (PMI) dropped to 51.8 in November from 52.5 in October, the fifth successive monthly fall in 2018 and the weakest growth since August 2016, figures released by IHS Markit on December 3 show. The market had been expecting a PMI of 53.20 by the end of 4Q18.

The performance of the manufacturing sector was slower due to a weaker increase in production, slower expansion in output and the first decrease in new orders for over two years. Decrease in new export orders was the fastest since December 2012. The recent fall in PMI indicators has been driven to a large extent by introduction of new emission standards in the automotive sector in force since September. Therefore, the situation is expected to stabilise and conditions in the industry to improve next year.

“Worryingly, ongoing production issues in the autos sector hampered domestic and foreign client demand. Not only was the rate of output growth much weaker than those seen earlier in the year, but it also dipped further below the long-run series trend,“ said economist at IHS Markit Siân Jones, who compiles the PMIs.

The fall in new business reflected subdued demand among domestic and foreign clients, with new export business also declining for the first time in over two years. “Unfavourable demand conditions also meant firms were less inclined to raise factory gate charges in November. Despite a quicker increase in input costs, output price inflation was the slowest in over a year,” Jones added.

The degree of optimism was the lowest for almost six years following weakness in the auto sector and a decrease in foreign demand. Reflective of more subdued demand conditions, the rate of output charge inflation eased despite input prices increasing at a faster pace.