In this week's Business News, the Czech Republic sees a fall in truck production; household spending stagnates; January sees inflation up again; social security finds itself in the red for three years in a row and supermarkets are caught re-labelling out-of-date food.
The number of freight trucks produced in the Czech Republic has halved over the last decade, reports Hospodářské Noviny. While in 2001, four producers added 2,718 vehicles to the market, by 2011, that figure was down to 1,293, with only two companies making these vehicles. In the intervening years, both Praga and Škoda Mnichovo Hradiště have ceased production of freight vehicles; only Tatra, which made 702 vehicles in 2011 and Avia, which made 591 vehicles, remain in this market. The former saw an almost 25% drop in production in 2001, while the latter saw production increase by 23%. Of the total production, 993 vehicles were headed for export abroad. According to KPMG analyst Jan Linhart, this trend is the opposite of that in the global market, but the Czech truck business is so small that minor fluctuations can have a large effect.
Czech household spending is stagnating, according to new data from the Czech Statistics Office, and this is having a negative impact on the overall economy. Household consumption plays a significant role in GDP growth; the last three quarters of 2011 showed falls in this indicator of between -0.1% and -0.2%. The last time three quarters of negative growth in household spending were seen was in early 2009 and were a direct result of the global financial meltdown. Prior to that, the last such slowdown was in 1995. Between 2004-2008, reports ČTK, strong household spending contributed at least 2% annually to the country’s GDP. While the latest falls are of concern to analysts, they are still far smaller than the drops in 2009, which in the third quarter reached -0.9%.
The Czech Agriculture and Food Inspection Authority (SZPI) has discovered wide-scale defrauding of consumers by several major Czech supermarket chains. Specifically, they are accused of altering expiry date information on over-the-counter delicatessen goods, offering for sale goods that are technically unfit for human consumption. This week, the retail chain Kaufland was implicated for selling out-of-date cheese products in its store in Blansko, with inspectors banning 25kg of the product from being sold. Later, the SZPI announced that similar practices had been discovered at Tesco, Billa and Ahold. In all the cases, products such as salads and salami had initial expiry dates illegally extended via the addition of new labels, often stuck over the old ones.
Last year, the Czech government spent 39.5 billion crowns more on pensions than it received in revenue, reports ČTK. This represents the greatest fall since 2003 and leaves the Czech pension system in the red for the third year in a row. Further, 2011 pension revenue was 10.2 billion crows lower than in 2010. Overall, the social security system (combining pensions and healthcare) was 36.4 billion in the red in 2011. On the positive side, the healthcare system took in more than was spent, ending up 3.2 billion crowns in the black. According to spokesperson Jana Buraňová of the Czech Social Security Administration (ČSSZ), higher pension expenditures are responsible for the growing gap between revenues and spending.
Year-on-year inflation rose in January to 3.5%, up from the previous month’s levels of 2.4%, according to new data released by the Czech Statistics Office. Consumer prices rose 1.8% in January, primarily the result of a VAT increase from 10% to 14% coming into effect. The overall level of inflation is now at its highest for three years, while the month-on-month rise is the largest seen since January 2008. Specifically, January saw food and non-alcoholic beverage prices increase most as well as the cost of electricity and gas. Global crude oil price rises coupled with a weakening crown have also led to fuel costs rising. Conversely, prices fell in several areas including electronic goods and clothing. Meanwhile, wages remain stagnant, according to ČSA data.