Karolina SedlackovaThe Czech Republic’s industrial sector is facing a challenging period, with output falling for the second consecutive month in August. This decline, coupled with a decrease in new orders, indicates that the sector’s struggles may persist, potentially hindering the nation’s economic recovery.
In August, the working day adjusted industrial output dropped by 1.7% year-on-year, which was slightly less than the 2.8% decline forecasted by Reuters. The automotive sector played a crucial role in mitigating the overall decline. However, new orders experienced a 4.2% year-on-year decrease, following a 3.0% fall in July.
Petr Dufek, chief economist at Banka Creditas, expressed concern over these figures, suggesting they could signal a potential downturn in overall economic activity for the third quarter. He noted that while firms with backlogs of orders, particularly in the automotive sector, are managing to reduce delivery times, others are faring much worse.
This industrial weakness comes on the heels of data showing a slip in Czech retail sales in August, as high inflation impacts consumer activity. The broader Central European region is also experiencing industrial challenges, indicating a complex path to recovery.
The S&P Global Purchasing Managers’ Index (PMI) for September revealed further setbacks in Czech factory activity, with manufacturers reducing staff amid continued declines in production and new orders. The Czech central bank anticipates the economy to essentially stagnate in 2023, with a marginal 0.1% growth.
Analysts predict that the industrial sector will likely lag behind, especially given the economic weakness in Germany, the region’s primary trading partner. UniCredit economist Patrik Rozumbersky highlighted that the industry might not significantly contribute to the stagnant Czech economy for the remainder of the year.
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