Business Industrial production accelerates in August though construction output and retail growth slows

07-10-2015 13:08 | Ian Willoughby

Industrial output in the Czech Republic gathered pace in August, achieving year-on-year growth of 6.3 percent, according to figures released on Wednesday by the Czech Statistics Office.

Photo: Klára StejskalováPhoto: Klára Stejskalová The growth in construction production, by contrast, slowed to 4.7 percent, while retail also decelerated, growing by 3.3 percent in the eighth month of the year.

The motor of the Czech economy in recent years, car production, again drove industrial output, while metals processing was also instrumental in the acceleration from 4.6 percent growth in July.

Chemicals production, by contrast, held the sector back, as did poor performances in printing, the reproduction of recorded media and the manufacture of computer, electronic and optical devices.

New orders increased by 7.9 percent year-on-year in August, a jump from 2.2 percent the previous month. Orders from beyond the borders of the Czech Republic grew by 12.5 percent, while there was a slight decline – 0.7 percent – in domestic orders.

Analyst Petr Dufek of ČSOB bank told the Czech News Agency that industry in August had been characterised by very solid growth and increased orders, which indicated that the sector would continue to do well in the second half of the year. Growth in construction output in August fell to 4.7 percent year on year from 12.3 percent in July. The sector was driven by engineering projects, which made up for a falloff in building construction.

The number of planning permits issued and completed apartments declined in August, though more apartments were begun than in the same month last year.

Lukáš Hendrych of consultants BDO said August’s results were below expectations, with the month being the weakest of 2015 in terms of year-on-year growth in construction output.

State investments remained the main driver of the sector, Mr. Hendrych said; this had a positive influence on overall figures and compensated for a decline in building construction building construction.

Construction is still far below the pre-crisis levels of 2008, said Lukáš Kovanda, chief economist with Roklen. On the upside, the use of European funds for engineering projects was contributing greatly to overall production, he said.

Indeed, state engineering projects achieved year-on-year growth of 18.3 percent in August, while building construction declined by 2.0 percent.

As for why the latter declined, Komerční banka analyst Marek Dřímal said the expansion of infrastructure projects had drained the capacity of the entire sector; the revival of building construction started earlier, which evidently led its growth capacity to become exhausted sooner, he said.

Growth in retail revenues contracted to 3.3 percent in August, down from 5.5 percent the month before. Extreme temperatures are believed to have been a factor here as people stayed away from shops.

However, the chief economist of UniCredit Bank, Pavel Sobíšek, said August’s slowdown was most likely a one-off fluctuation, not evidence of a trend. The state of household incomes such ensure that growth returns to 5 percent year-on-year in the remaining months of 2015, he said.

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