Vladimír Urbánek (Kurzy.cz)
Macroeconomics  |  October 08, 2012 10:45:13

Comments to the industry - negative surprise drop in foreign orders

Results from the industry for August surprised. Unfortunately negatively. Index of industrial production recorded a slump of 3.1% and a negative image confirmed the decline in the value of new orders of 1.4%. With rising concerns can be seen mainly on decline in foreign orders by 0.5%. It is the demand from abroad, which had a domestic industry in recent years over the water. Domestic demand is certainly contrary, failure of foreign substitute, it remains weak, and this year is around the crisis of 2009.

Overall, the negative trend is confirmed by the gradual decline in production of motor vehicles, a dominant segment of the Czech industry. Falling demand for cars and the associated reduction in sales of cars arrived from Southern European countries have even Germany. In a similar vein, speaking and leading indicators of the Land (decline in industrial indices Ifo and PMI) and also from the Czech Republic (drop PMI).

Domestic industry in the coming months will not thrive. Can be counted as a further decline in industrial production and the value of new orders.Due to the fact that the industries in the Czech Republic, for almost 40% of workers can count on the negative impact on unemployment.


Miroslav Novak

Industry recorded in August unexpectedly strong decline. Production fell 3.1 percent. The data did not affect the time variation of the calendar, this year's and last August had the same number of working days. Negative data complements the decline in sales, employment and new orders.

With the inflow of foreign direct investment in the previous decade, the production of computer technology and electronics has become an important sector of Czech industry. Now, however, this sector downturn drags down overall industrial statistics. In August, production in this sector fell by 19.4 percent. Unfortunately, production declines in other key sectors: automotive industry reported a decrease of 3.6 percent, production mills fell by 13.6 percent.

Negative situation, companies adapt finding savings on the cost side, which led to a reduction in employment by 1 percent. Average wage growth slowed to 3 percent, but adjusted for inflation, a reduction in real wages.

The decline in new orders and the fact that purchasing managers index remains below 50 points indicates a continuation of the recession in the Czech industry in the next months.

Thanks to the favorable early this year, we expect this year, industrial production increased by 0.6 percent over last year's growth of 6.9 percent.

David Marek, Patria Finance

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