According to data published today by the Czech Statistical Office (CSO), confidence in the Czech economy rose again in June after a month of decline. Czech businesses and consumers overall became slightly more optimistic than in the previous month, although this optimism was mainly driven by industrial companies, while consumer confidence fell for the second month in a row.
The business confidence indicator, based on a numerical scale centred around a base value of 100, represents a balance point between optimism and pessimism and is used to measure the level of confidence in the economy. According to the data, the business confidence indicator rose by 2 points to 97.4 points. In the industrial sector, the increase was 4.3 points, bringing the total to 94.8 points. Businesses in the construction sector increased by 0.6 points to 103.7 points. In selected services, the change was minimal, with an increase of only 0.1 points compared to May, bringing the total to 99.6 points. In contrast, in the trade sector, the indicator fell by 0.8 points to 95.6 points.
Jiří Obst, head of the CSO’s Economic Surveys Department said that the increase in confidence in the Czech economy in June was mainly due to the optimism of entrepreneurs in the industrial sector, while in the other economic sectors confidence remained stable without any noticeable changes.
According to Petr Dufek, chief economist at Banka Creditas, there will be no significant changes in the direction of economic development this year, at most the economy will register growth of around 1%, in fact Hradil, chief economist at Cyrrus also confirmed this assumption.
Dufek also stated that the significant industrial improvement cannot be overestimated. He noted that although companies expect growth in production, order surveys appear pessimistic. Therefore, according to him, it does not make sense to increase production significantly. Against this backdrop, Radomir Jáč, chief economist at Generali Investments CEE, expects the mood of the industrial sector to fluctuate in the coming months.
With regard to consumers, the confidence indicator decreased by 0.6 points to 101 points. Statisticians report an increase in the number of people who expect the general economic situation in the Czech Republic to worsen over the next 12 months. On the other hand, the number of people rating their financial situation as worse than in the previous 12 months decreased. However, the number of people who believe that the current period is not suitable for making large purchases remained unchanged.
According to Hradil, the weakening of consumer confidence is due to concerns about the future economic situation. However, he sees no objective reasons for these fears. Inflation seems to be relatively under control, the unemployment rate remains the lowest in Europe, and real wages are finally growing at a solid pace after two years of setbacks. Moreover, the Czech government does not seem to have any further austerity measures planned for this period.
Miroslav Novák, analyst at Akcenta, emphasised that stronger growth in median wages in the coming quarters, at least at the level of the average, is necessary for consumer confidence to grow further from its current level of just over 100. In other words, it is necessary for the financial situation of low- and middle-income households to improve further.
In fact, Petr Javůrek, financial analyst at Provident Financial, links the weakening of consumer confidence to the poor development of the economy in the first quarter and stated that an acceleration of economic growth could indicate an increase in business confidence.
Finally, analysts agree with today’s economic survey by the Czech Statistical Office (CSO), but do not want to overestimate the significant improvement in confidence in the industrial sector, as they believe this sector is easily subject to fluctuations. The trend of confidence in the Czech economy suggests that this year’s economic recovery will only be cautious.
Sources: https://www.ceskenoviny.cz/zpravy/duvera-v-ekonomiku-cr-se-vratila-v-cervnu-k-rustu/2535627
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