May's industrial output disappoints

Industrial production was lower than analysts had forecast in May, with output dropping 21.7 percent on the year, according to figures released by the Czech Statistical Office (ČSÚ) June 30. The drop was only a slight improvement over April's drop of 22.1 percent. Confidence indicators have been on the rise, but real economic data has lagged behind the optimism of the preliminary data, according to analysts, keeping the declaration of a turnaround just out of reach.

"We expected May's decrease to be lower than April's by 3 percentage points, or about 18 percent, so it's a bit of a disappointment for us," said Jiří Škop, an economic and strategy researcher at Komerční banka.

Improvement to come

The Purchasing Managers Index (PMI), an economic indicator based on new orders, inventory levels, production and supplier deliveries, had indicated a potentially better result for May's production, Škop added. April's PMI for the Czech Republic indicated a continued sharp deterioration, but the slowest in six months.

"[Industrial production] is not corresponding with the PMI survey data; most of the time, it develops in line with the data," he said. "I think we will see some stabilization in the industrial sector now. When you look at the workaday adjusted figures, we can call this data a stabilization, if not an improvement."

Both April and May had one less working day this year. When adjusted for the effect, ČSÚ estimates industrial output fell 19.8 percent year on year in May. The lowered output has had a severe effect on the employment rates in the manufacturing sector as well, with registered employment in firms with 50 or more employees down 12.5 percent in May, year on year.

Škop said that, after a couple months of stabilization, the second half of 2009 will bring improvement for industrial output, and GDP growth as a result.

"We have -11.7 percent [in industrial output] for the year. There will be some recovery in the eurozone in the second half of the year that will also mean recovery for Czech industry. Right now, it's only supported by the car-scrap subsidies abroad, but that stimulus will vanish in the third quarter," he said.

Claire Compton can be reached at
ccompton@praguepost.com