Confidence in Czech economy at 18-month high

Confidence in Czech economy is at its highest level in a year and a half, having risen from to 99.7 points in May up from 94.7 points the previous month, the Czech Statistical Office (ČSÚ) said on Monday. Growing confidence stems from the loosening of anti-coronavirus measures as the new infection rate continues to drop.

Consumer confidence rose by 8.9 points to 102.8 points, the highest level since last February. Confidence among entrepreneurs rose by 4.3 points to 99.1 points, mainly due to trade and services.

“During May, the announced and partially implemented dismantling of measures against the spread of coronavirus significantly contributed to the growth of the business confidence indicator, especially in the trade sectors and selected service segments,” ČSÚ statistician Jiří Obst said. “Respondents from these sectors rated their current economic situation much better than in previous months, and their expectations for the coming months are also relatively optimistic.”

The value of 100 points in the index expresses the long-term average from 2003 to 2020. The aggregate indicator was last over 100 in September 2019. In May 2020, it stood at 75.7 points.

Petr Dufek | Photo: Jana Přinosilová,  Czech Radio

“The mood has improved in all sectors of the Czech economy. In industry alone, sentiment is the best in almost the past 3.5 years,” ČSOB analyst Petr Dufek said. “The companies evaluate their current situation significantly better than a month ago and are optimistic about the future in terms of demand or recruitment.”

Among consumers, confidence has risen sharply for the second time in a row. It was 84 points in March, 93.9 points in April and rose to 102.8 points in May.

“People are significantly less concerned than in previous months about the deterioration of the overall economic situation and job losses. However, expectations of consumer price inflation did not change month-on-month, so in May they remain well above their long-term average,” ČSÚ statistician Silvie Vyplašilová said.

Compared to April, business confidence increased by 4.4 points to 99.3, which is 13.8 points higher year-on-year. Compared to April, the share of entrepreneurs who assessed the overall economic situation as good increased significantly. The share of entrepreneurs expecting an improvement in their economic situation in the next three months also increased. The stock of goods in warehouses did not change month-on-month.

For the second month in a row, business confidence in services also increased significantly. It reached 92.7 points in May, 85.4 points in April and was 76.8 points in March. In May, for the first time since last October, the share of entrepreneurs who positively assess current demand prevailed. However, the share of entrepreneurs who expect an improvement in demand within three months did not change month-on-month.

In industry for the first time since January 2018, the number of industrialists evaluating demand as more than satisfactory prevailed. The stock of finished products remained almost unchanged month on month. The share of entrepreneurs expecting a growth rate of production within three months decreased compared to April’s significant growth.

Confidence among builders rose by 4.3 points to 115.2 points compared to April. The share of builders assessing demand as insufficient decreased, while the share of those who expect an increase in the number of employees within three months increased slightly.