Confidence in economy lowest in five years amid fears of downturn

Photo: Jaroslava Mannová / Czech Radio

Confidence in the Czech economy declined again in November, albeit at a slower rate than in October. It is now at its lowest since July 2014, according to data released this week by the Czech Statistics Office.

Photo: Jaroslava Mannová / Czech Radio
Consumers, whose confidence reached the weakest value since October 2004, contributed significantly to the latest slump, while entrepreneurs’ confidence in the economy was at its lowest since May 2014.

Analysts said the decline stems from fears of a downturn in the Czech economy.

ING Bank chief analyst Jakub Seidler told Czech Television that negative reports from abroad had contributed to household confidence reaching its lowest level for half a decade.

Mr. Seidler said that despite this trend household consumption was still healthy for now. However, it is likely to weaken gradually if household sentiment does not improve again, he said.

Jana Mücková from the investment platform told Czech Television that there were as yet no fears of an economic crisis among consumers. But she also pointed out that that indicator was also delayed in the last crisis and declined sharply once it actually hit.

Confidence among Czech entrepreneurs slid for the third consecutive month, most notably in industry, where it went from 87.5 points in October to 86.9 in November. This is the worst figure since August 2013.

Industry chiefs expect a slight decline in the expansion of production and employment over the following three months.

Confidence decreased by half a point to 103.8 points in the construction sector, where a worsening of the overall economic situation is expected in the next three months. In services, confidence fell by 0.2 to 94.2 points.

Bucking the trend, confidence among retailers climbed from 90.6 points in October to 96 points in November.

Retailers expect the overall economic situation to get better in the coming months, Jiří Obst of the Czech Statistics Office told Czech Television. This is linked to the approaching festive period, he said.

Michal Petřek of communications firm Acema told Czech Television that entrepreneurs in general had some concerns about the economy due to the country’s ongoing labour shortage and the related need to increase wages.

Mr. Petřek also said that economic news from Germany was causing worries in the Czech Republic, despite the fact German research indicated a slight upturn in confidence this month. Nevertheless, production in the country is still in recession.