Industrial output turns a corner

Czech industrial output grew 16.9 percent year on year in May, although compared with the month before, growth largely stagnated with a 0.1 percent bump, according to data released by the Czech Statistical Office July 9.

May's result was better than market expectations, nonetheless, and analysts credited growing demand in neighboring countries for the revival in Czech industry. New orders have been growing at a double-digit rate, and in May new orders were 27.2 percent higher on the year. Orders from abroad rose the same amount.

"Together with export activity statistics, this shows that the situation in the sector is really improving," said Jiří Škop, economic analyst at Komerční banka (KB), who added that the growth was contributed to mainly by manufacturing for automotive, trailers and semi-trailers, fabricated metal products and basic metals.

The boost in foreign demand has helped drive industrial recovery in the past few months and will continue to be a force behind overall economic recovery for the Czech Republic, the Industry and Trade Ministry said in a release.

"Accelerating growth of industry in the eurozone and mainly in Germany has markedly raised the total growth and above all foreign orders," said Deputy Industry and Trade Minister Erik Geuss.

The high growth number was also created by a low comparative rate last year, however, when industrial output was significantly hampered by the recession. In May 2009, industry fell more than 20 percent. The drop eventually began to slow after May of last year.

On the flip side, the biggest drop in manufacturing came from the beverage sector, which was down 14.4 percent year on year.

The month-on-month growth was a disappointment to the market because the development of German orders was not on pace with higher growth in previous months.

Last year's drop in industrial production totaled 13 percent, and analysts at KB predict 2010's final tally will be a much more favorable 9.2 percent growth, again based on the lower comparative year and growing demand. One negative effect in 2010 will be the ending of the car-scrap subsidies abroad, but growing orders abroad are likely to outweigh that factor, Škop said.

"The external revival is so strong that this effect has not been seen in the data that much so far," he said.

The unemployment numbers this month were good, as well. According to the Labor and Social Affairs Ministry, the unemployment rate fell to 8.5 percent in June, down 0.2 percent from May. The rise doesn't mean more permanent jobs, however, since the growth was attributed to seasonal jobs.

Claire Compton can be reached at
ccompton@praguepost.com