Czech industry accelerates growth to 8.1 pct in June --CSU


06.08.2014 12:27

Prague - Growth in Czech industrial production accelerated to 8.1 percent in June from May´s 2.5 percent, mainly thanks to the production of automobiles, the Czech Statistical Office (CSU) announced today.


Průmyslová zóna, výroba, emise, znečištění ovzduší - ilustrační foto ČTK/AP Frank Augstein

Month on month, seasonally adjusted industrial production was 0.1 percent higher.

The value of new orders rose by 15.8 percent year on year, also mainly thanks to motor vehicles producers.

Analysts say that the results confirm that industry is the main driving force of the domestic economy.

Production of motor vehicles, trailers and semi-trailers grew by 15.1 percent yr/yr. Good results were also seen by producers of electrical equipment and rubber and plastic products, for example.

On the other hand, a decrease was registered by other transport equipment and electricity, gas, steam and air conditioning supply.

"We see also June´s result for industry as very good and promising from the point of view of the whole Czech GDP. Industry stays as the main driving force of the Czech economy," said CSOB analyst Petr Dufek.

The outlooks for industrial production growth remain optimistic also for the second half of the year, said Akcenta analyst Miroslav Novak.

Indicators like the Purchasing Managers´ Index (PMI) and business confidence in industry show solid values, he added.

"The development of the German and European economies, as well as the newly introduced economic sanctions against Russia, raise moderate concerns. Growth in industrial production for the whole of this year should move between 6 and 8 percent," Novak forecast.

The value of new orders increased by almost 16 yr/yr in June 2014. Non-domestic new orders increased by 19.1 percent and domestic new orders by 10 percent.

Industrial production in May grew at the weakest pace since the start of the year. "Industry as the driving force of the Czech economy started to show signs of wear and tear," analyst Patrik Rozumbersky of UniCredit Bank said at that time.

A faster growth than in June this year was registered in March when Czech industry added 8.7 percent.

Czech construction grows by 5.1 pct in June

Czech building output returned to growth in June after May´s stagnation, improving by 5.1 percent year on year, and 45 percent more flats started to be built, according to data made public by the Czech Statistical Office (CSU) today.

The growth also reflects the fact that June 2014 was one working day longer compared to June 2013. Against May, building output increased by one percent.

"Construction has lately been reviving again, even when only very slowly," Home Credit analyst Michal Kozub commented on the data.

Investments of the state as well as of private investors are higher. Investors are gradually returning to projects they have prepared from the pre-crisis years. They only often modify them moderately to achieve higher return on the investments. These are projects for office buildings as well as shopping centres, he added.

"Construction has probably arrived at the turning point but this is certainly not sufficient for return to boom. In a better case, the full-year growth will be near zero," said CSOB analyst Petr Dufek.

When evaluating the growth figures, the effect of a very low comparative base from last year´s June cannot be ignored. Production at that time sank by 11.2 percent, he recalled.

Construction still suffers from lack of orders. There is a bit more work than a year earlier but much less than in the strong years 2007 and 2008, Dufek remarked.

Building construction as well as engineering construction did well in June. However, planning and building control authorities granted by 1.2 percent fewer building permits than last year in June and the approximate value of the permitted constructions dropped to Kc22.8bn.

Czech construction output was growing each month this year except for May but till November 2013 it had been falling regularly.

Compared to the same period of 2008, the year of boom, the construction output thus far is 27 percent lower in the first half of this year than before the crisis.

Czech foreign trade ends in Kc19bn surplus in June

Czech foreign trade ended in a Kc19.1bn surplus in June, Kc4.1bn higher year-on-year, with exports growing by 12.9 percent and imports by 11.9 percent, according to preliminary data made public by the Czech Statistical Office (CSU) today.

Year-on-year, the total trade balance was favourably influenced mainly by a decrease in the deficit in mineral fuels of Kc1.7bn, and by an increase in the surplus in miscellaneous manufactures articles of Kc0.9bn and machinery and transport equipment of Kc0.7bn.

The total balance in the national concept of foreign trade was negatively affected by a growth in the deficit in chemical products of Kc1.1bn.

The foreign trade surplus in June is the second highest this year, analyst Petr Dufek of the CSOB bank said.

"The double digit growth of exports and lagging imports reflect an excellent shape of the Czech industry on the one hand and increasing foreign demand on the other," Dufek added.

"The statistics show that demand in Europe in particular is growing," Raiffeisenbank chief economist Helena Horska said.

"New sanctions against Russia will unfavourably influence the sectors affected by them (above all the military and aviation sectors), but this will not jeopardise the increasing surplus of the Czech trade balance," Horska said.

The foreign trade figures were very good and confirmed that the Czech export is in an excellent condition, the Czech Association of Exporters said.

"Czech companies exported goods worth Kc1,000bn in total only to the euro zone in the first six months of this year, for example. In the same period of 2013, the value of these exports was Kc877.7bn," Association of Exporters chairman Jiri Grund said.

David Marek, chief economist at company Deloitte Advisory, said the 14.4 increase recorded for exports to Germany is crucial.

"But the latest data coming from Germany and other Western European countries bring certain warnings. Indicators for the German economy, such as the Purchasing Managers' Index, ZEW (economic sentiment) index and the business climate index published by the IFO institute, have continued to worsen since the beginning of the year," Marek said.

Trade balance with EU-28 member states ended in a surplus of Kc53.2bn, a year-on-year growth of Kc11.5bn.

Deficit in trade with non-EU countries increased by Kc7.2bn to Kc33.1bn.

In January-June 2014, trade surplus reached Kc104.3bn, a year-on-year increase of Kc27bn. Exports grew by 13.5 percent and imports increased by 12.3 percent year-on-year in the first half of 2014.

The national concept of foreign trade reflects export and import performance of the Czech economy and measures real trade in goods carried out between the Czech and foreign entities.

On the other hand, the cross-border concept of foreign trade reflects only physical movements of goods across the border regardless of whether trade between the Czech and foreign entities occurs. These data are internationally comparable and can be used as indicators of development of the value of the trade.

In the cross-border concept, exports increased by 15 percent and imports grew by 13.7 percent year-on-year in June 2014, according to CSU's preliminary data.

Total exports of goods reached Kc296.6bn and total imports reached Kc256.7bn.

Exports of machinery and transport equipment rose by 16.9 percent year-on-year to Kc23.7bn. Exports grew mainly in road vehicles, automatic data-processing machines and electrical machinery, and appliances.

Imports of mineral fuels fell by 3.7 percent year-on-year. Imports of crude oil increased by 16.3 percent in value, while imports of natural gas decreased by 23.1 percent in value.

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