March Confidence Index: +2.2 points

What is the general trend of confidence indicators

The aggregate confidence index or Economic Sentiment Indicator (ESI) is a weighted average of the seasonally adjusted confidence indicators of industry, construction, trade, services and the consumer confidence index. This index is important and useful for understanding whether businesses and consumers in a country, the Czech Republic in this case, have a pessimistic or optimistic view of the future. Specifically, there are two indicators, the consumer and the business index, and both provide information well in advance about future trends and allow to identify investment scenarios and turning points in the economy, thus enabling to make decisions to counter or support these trends. In March of this year, the economic sentiment indicator (ESI), expressed as a basic index, increased by 2.2 points compared to February 2023 (91.7) to a value of 93.9, which is still lower than last year’s March figure (96.8). Despite the positive growth in March, the components of the aggregate confidence index show contrasting trends. In particular, while the business confidence indicator increased by 2.7 points to 95.2, the consumer confidence indicator decreased slightly by 0.6 points (87.1) compared to February (87.7).

(data source CZSO)

How entrepreneurs’ confidence has changed across the sectors

As far as the industrial sector is concerned, the confidence of entrepreneurs increased significantly from February to March, the confidence indicator rose by 6.7 points from a value of 88.7 to 95.4. The percentage of enterprises that assess current overall demand negatively is still very high, but there was a slight decrease compared to February. In addition, a large percentage of entrepreneurs in the industrial sector anticipate an increase in manufacturing activity in the next three months, and in parallel with this, the number of companies anticipating an increase in prices in the following months has dropped. Overall, compared to March last year, the confidence of entrepreneurs in the sector has improved. Similar to industry, the confidence index of the trade sector increased from February to March to a value of 99.6 (+5.2 points), just as the number of businesses supporting a possible increase in retail prices decreased for the second month in a row. In addition, the percentage of entrepreneurs in the business sector stating that their general economic situation is positive or that they expect it to improve also improved compared to the previous month. In contrast to the industry and trade sectors, confidence in the construction sector in March decreased by 6.0 points compared to the previous month (100.2). The current labour demand is judged to be insufficient and companies expect a decline in the number of employees as well as in the growth rate of construction activity in the coming months, in addition, expectations of price increases remain high. The indicator for the service sector, including the financial sector, also fell slightly compared to February (-0.8), and companies assess both the demand for services and their current economic situation negatively. In general, with the exception of industry, all the sectors described above experienced a decrease in the confidence indicator over the course of one year, namely from March 2022 to March 2023.

(data source CZSO)

How consumer confidence has changed

Looking at February this year, consumer confidence in the economy fell by 0.6 points and the percentage of households judging their financial situation to have worsened over a 12-month period increased. Similarly, from February to March, the number of respondents (32%) who said they were having difficulty making ends meet and who considered the coming months not a good time to shop increased. On a positive note, concerns about rising unemployment and further price increases declined for three consecutive months. Overall, the consumer confidence index has improved since March last year.

Source: https://www.czso.cz/

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Graphic source: https://storyset.com/