Confidence in Czech economy rebounding after sharp fall

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Confidence in the Czech economy jumped by 9.5 points month-on-month to 86.7 points in July. Consumers and entrepreneurs were the most optimistic, displaying the highest month-on-month growth in confidence since the survey first began, according to the latest figures from the Czech Statistics Office quoted by the Czech News Agency.

Czech economic confidence saw an unprecedented fall of almost 20 points in April, after the coronavirus crisis hit, before rising again slightly in May and June.

However, despite the strong growth seen in July, confidence in the economy remains below the long-term average, the statisticians said.

Confidence among business people climbed by 10.9 points month-on-month to 84.7 points month-on-month in July; the figure for consumers grew by 2.7 points, reaching 96 points.

The significant growth in the business sector was due to an increase in optimism in services and particularly industry.

Jiří Obst of the Czech Statistics Office said the industrial sector confidence indicator had increased most in a single month-on-month comparison since the beginning of such monitoring.

Jakub Seidler, chief economist at ING bank, told the Czech News Agency that although July’s confidence indicators, especially in industry, came as a positive surprise, they still needed to be viewed with cautious optimism.

Mr. Seidler said this was not only because future developments were once again becoming more uncertain due a spike in detected Covid-19 cases, but also because recovery in foreign demand was unlikely to be so rapid as many countries were still struggling with the epidemic and related restrictions.

Jan Hadrava of PwC said that optimism, especially regarding orders in industry, appeared to be very positive news – and may signal a faster return to the pre-crisis state than recently expected.

On the other hand, Mr. Hadrava said, development in the autumn will depend on how companies cope with a possible new wave of the coronavirus, the end of a moratorium on loan repayments and the uncertain future of the government’s Antivirus program.

Last month consumers’ concerns about the deterioration in the overall economic situation were slightly lower month-on-month, while concerns about a deterioration in their own financial situation were up slightly.

However, unlike in industry, there has not been a rapid bounce back in household confidence to pre-Covid 19, ING’s Jakub Seidler said, adding that a similar trend had been seen in the entire Euro area and was not specific to the Czech Republic.

From around the autumn of 2014 until the beginning of this year, the composite confidence indicator steadily held at around 100 points. From January this year, however, it began to decline slightly.

In March the first cases of coronavirus infection were recorded in the Czech Republic, followed by government measures against the spread of the virus, which included the closure of restaurants, cinemas and shops, as well as travel restrictions.

Confidence in the economy then fell to below 80 points in April, a point it had last reached during the economic crisis in 2009.