Czechia posted 43 in the January Manufacturing Purchasing Index by market intelligence company S&P Global amid another decline in new sales and output.

The index increased from 41.8 in December but remained well below the 50 mark, separating decline and growth. The decline was the second-slowest since March 2023, showing some improvements, but deteriorating conditions have persisted since June 2022.

“January PMI data indicate a troublesome start to 2024, as demand condition remained markedly subdued and firms continued to adjust production levels down to account for this”, Principal Economist at S&P Sian Jones commented.

Jones also highlighted that companies were laying off staff including permanent redundancies. “Costs and selling prices were reduced further, with output charges falling at one of the sharpest rates in almost 14 years”, he also stated.

Sustained weakness in domestic and external demand drove down new sales. New export orders were falling considerably, and order cancellations were occurring from clients in key export markets.

The output of Czech producers fell for the 20th month in a row at a pace not too different from December, the S&P report also noted.   

Jones expects disinflationary pressures in the manufacturing sector to prompt the Czech central bankers into further rate cuts this year. CNB lowered interest rates by 0.25 percentage points to 6.75 in December in the first alteration since current governor Ales Michl took over in the summer of 2022.

Despite the grim January data, Jones ended on a slightly positive note, stating that “firms foresee a rise in production through 2024, with some expecting demand to have improved by the middle of the year”.

He added that “output expectations were the strongest for five months as a result”.