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Indicator Analysis: Industry performs well thanks to the car sector

In March, industrial production increased a high 10.9%. Nevertheless, the higher number of working days also helped industry to reach an excellent result. Working days adjusted industrial production increased 4.4%. The automotive industry remained the traditional engine for industry. The construction sector also performed well, adding 6.2% yoy. Construction added 2.0% after the working days adjustment. However, the take-off of construction production will only be gradual this year. A small number of launched public sector projects and the lengthy building permits process remain a drag.

Industrial production did well in March.Double-digit  speeds increased the manufacture of motor vehicles, trailers and semi-trailers (+18.4% yoy), manufacture of fabricated metal products (+13.0% yoy) and manufacture of rubber and plastic products (contribution +6.7% yoy). The development of new orders brought good news, as well. These increased 15.1% yoy. The good condition of Czech industry is also reflected in the growth of wages of its employees. The average gross monthly wage in March reached 31,564CZK and was 5.6% higher than of the previous March.

Czech industrial production should perform well in the coming months. Car registrations in the euro area are slowing; however, in our opinion, this will not have a major impact on carmakers. This is more likely to hit suppliers for West European car producers. Other sectors are also likely to do well. In a yoy comparison, the production of chemicals is increasing significantly and production of electricity experiences a similar development. Moreover, higher economic activity in the euro area is contributing to the good performance of domestic industry, which is reflected in the growing demand for Czech goods. This year, we expect industrial production to grow 7.3% on average.

In March, a good result was achieved in construction. It grew 6.2% yoy, and after the working days adjustment it improved 2%. Production in building construction increased 6.4%; production of civil engineering construction grew 5.5%. Still, the take-off of the construction sector will probably be slow this year. In the public sector, only a small number of projects have yet to be launched, while residential housing developers still lack a modern zoning plan for Prague. In addition, issuing building permits is lengthy. Consequently, developers cannot flexibly respond to rising demand, and the construction industry is lagging behind. The promise for the future is the number of dwellings started, which was 53% higher yoy in March. The number of building permits issued increased 8.9% yoy in March. This year, we expect construction output to average -0.2%.