The Czech IHS Markit Manufacturing Purchasing Managers Index (PMI) fell to 54.9 in August from 55.4 in July, the weakest result since August 2017, figures released by IHS Markit show.

The market consensus had anticipated a PMI of 55.2 in August. Any figure greater than 50.0 indicates an overall improvement in the sector.

The data shows overall operating conditions improved in Czechia and companies were still able to find workers in an extremely tight labour market.

“Employment growth painted a more positive picture, with firms gradually starting to fill long held vacancies, following sustained reports of a worker shortage,” IHS Markit economist Sian Jones said.

On the negative side, output and new orders witnessed weaker expansion and inflationary pressures remained strong, which increased the input costs, especially higher cost of steel and exchange rate movements, at the second-fastest rate since November 2017.

“Input price inflation remained elevated and firms stated they were partly able to pass costs on to clients through higher charges,” Jones said.

Despite weaker results, overall growth was in the line with the long-term average. Domestic demand remained strong and foreign demand accelerated after a 20-month low in July.

"The latest survey data signalled a strong, albeit softer improvement in the health of the Czech manufacturing sector. Rates of growth in output and new orders dipped to 12-month lows, with purchasing activity also rising at a slower pace," Jones said.

The backlog rate slowed down to the weakest number since December 2016. Business confidence, on the other hand, dipped to the lowest since October 2016, even though remained strongly positive.

“Despite all of above, current PMI level nevertheless still signals an improvement in general manufacturing conditions,” said Raiffeisenbank analyst Jakub Cervenka.