Czech industrial production increased at constant prices by 1.5% year-on-year in February, and improvement from the -1.1% contraction in January driven mainly by a slump in car production, according to the data by the Czech Statistics Office published on April 8. Seasonally adjusted industrial production grew by 0.5% month-on-month.
“These figures surprised somewhat favourably, especially in the context of weaker leading indicators and data from abroad. However, the relatively strong figure is partly due to the lower comparative base in electricity production last year that was caused by a shutdown at the Temelin nuclear power plant,” said ING Chief Economist Jakub Seidler.
In a worrying parallel development, Czechia’s PMI manufacturing index has been falling steadily since the autumn of 2017 and is now in negative territory, falling at its fastest rate since December 2012.
Current industrial production has been influenced the most by electricity, gas, steam and air conditioning supply, up by 0.8 percentage point (pp) to 6.7%, manufacture of electrical equipment up by 0.2pp to 3.0%, and manufacture of machinery and equipment by 0.2pp to 2.3%. While it decreased in car production by 0.8% y/y, manufacture of wood and products of wood by 7.0% and production in chemicals and chemical products by 2.7%.
“The automotive sector has grown by 2% in 2018 - following double-digit annual growth since 2014, and so the weakest dynamics since 2013. Recent data suggest the car sector will at best stagnate this year,” Seidler said.
“Sales from industrial activity at current prices increased by 3.6% y/y in February 2019. Direct export sales of industrial enterprises increased at current prices by 4.9%. Domestic sales, which include also indirect export via non-industrial enterprises increased at current prices by 1.9%,” the report stated. The value of new orders increased by 1.4% y/y.
“Although today's numbers from domestic industrial production have not disappointed, data from abroad, mainly Germany, have not added much optimism yet. … Though there are some signs of stabilization, we believe that Czech industry will slow close to 2% y/y this year, after 3.3% growth in 2018. Further downward revisions are not ruled out, particularly if forthcoming global data does not start to improve,” Seidler added.