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Industry and trade refute doubts about performance

August’s real economy statistics showed that industry and external trade were able to maintain their good condition over the summer. Industrial production during the two holiday months cumulatively remained yoy unchanged; August in particular showed a decent result. External trade significantly increased its surplus and even the situation in construction showed some improvement when it emerged from double-digit declines. 

Industrial production recorded strong growth in August. After July’s statistics were affected by company-wide holidays in the majority of the automotive industry; most of the labour force returned to work in August and industrial production added 12.1% mom. In a yoy comparison, the dynamics printed at 13.1%. The low statistical base from last year (when company-wide holidays were in August) and calendar effects (August had two more days this year) provided notable help. After the calendar adjustment, industrial production increased 7.7% yoy. Both holiday months recorded a slight cumulative decline of 0.2% yoy, which refutes any possible doubt about their summer performance.   

New order statistics indicate that demand for Czech industrial products is almost evenly split between external and domestic demand. Demand for cars is especially strong. It even forced the biggest Czech car producer to add Saturday shifts to meet the demand. Beside the demand for cars, we see elevated demand for electronics, as well.

Continuous strengthening of external demand is apparent also in external trade statistics, which printed a record-high August surplus amounting to CZK 13.8bn. July and August together brought an increase in the trade surplus of CZK 11.8bn. Also in external trade, cars played the main role as their demand increases exports. Import growth is subdued due to low investment activity and relatively cheap commodities.

The drop in car plant production (and in industry as a whole), also impacted the dynamics of external trade. Exports fell 12% mom in July, while imports declined just 5.9%. The balance of trade thus slumped into the negative (CZK 1.5bn) for the first time in 2016, following June’s surplus of CZK 22.9bn (and compared with a surplus of CZK 4.4bn in July 2015). While there was a significant drop in the surplus of trade with cars, the deficit of trade with mineral fuels improved on the back of lower oil prices after the Brexit referendum. The latter was set to benefit the August data, too, and we expect there was an improvement in car production and exports. The external trade balance thus likely posted a surplus in August.

Construction emerged from double-digit declines in August and dropped just 5.9% yoy. Even here, the calendar effects played a positive role. Adjusting for them puts the yoy decline at 8.4%. Building construction is the reason. There was significant growth in new family houses started, but on the other hand, the number of started multi-dwelling buildings significantly decreased. It thus seems the problem with Prague’s metropolitan zoning plan persists. The demand for housing remains strong and it pushes up prices. On average, flats increased roughly 10% yoy.

So far, we do not see the situation in the construction sector as promising. There’s no new infrastructural construction starting, and a new metropolitan plan is still not in sight.