Confidence in Czech economy drops again in June

Overall confidence in Czech economy decreased again month-on-month in June, and the composite confidence indicator was 0.8 points lower compared with May, the Czech Statistical Office (CSU) said today.

 Among entrepreneurs confidence increased slightly only in trade again; in construction, in selected services and in industry it declined. Confidence of consumers increased month-on-month.

 Compared with June 2011, the composite confidence indicator is lower.

 Consumer confidence indicator increased month-on-month in June, and it is still lower year-on-year.

 The survey taken among consumers in June indicates that consumers are for the next twelve months less afraid of a drop in the overall economic situation as well as in their own financial standing compared with May.

 "Percentage of respondents expecting an increase in unemployment increased. The share of respondents intending to save money increased too. Respondents are still afraid of rises in prices," the CSU said.

 "There was a certain slowdown of some components of demand in the second quarter of the year," Confederation of Industry analyst Bohuslav Cizek said.

 "The confidence indicator also reflects the fact that the Czech strongly open economy reacts to the development of external environment and must be prepared for problems," Cizek said.

 Many companies realise this and project the unfavourable development of external environment in their expectations, he said.

 The month-on-month increase in the indicator of confidence among consumers is a surprise, Miroslav Novak, an analyst at company Akcenta, said.

 The indicator has dropped to such low levels recently that a further decrease of its value has already become difficult, Novak said.

 But the growth in unemployment in the months to come will certainly prevent a further increase of confidence among consumers, he added.

 Petr Dufek, an analyst at the CSOB bank, said consumers are in a bad mood already now anyway, like they were at the beginning of the previous economic recession.

 The inflow of negative news from the economy and concerns about unemployment will continue to fuel households' pessimism, according to Dufek.

 "The outlook for the months to come isn't rosy. The deepening crisis in the euro zone will remain the dominant factor for the development of the Czech economy," Novak said.

 Worse news from the European economy made the rate of the euro versus the dollar weaker, which had an impact on the weakening of the crown, Cizek said.

 "The weaker rate is helping exporters, but volatility of the rate and uncertainty of its development in the months to come is the subject of their concerns," he added.

 In industry, the assessment of current overall economic situation decreased in June.

 The assessment of the current total and foreign demand decreased slightly. According to respondents, stocks of finished goods did not change.

 Overall, confidence in industry decreased compared with May, and in a year-on-year comparison it is lower too.

 In construction, the assessment of current economic situation decreased month-on-month in June. The assessment of total demand fell too compared with May.

 Overall, confidence in construction decreased month-on-month in June and it remains lower year-on-year too.

 In trade, the assessment of current economic situation increased compared with May. The stocks increased slightly.

 Overall, confidence in trade increased slightly month-on-month, but it is still lower year-on-year.

 In selected services, the assessment of current economic situation decreased in June compared with May. The assessment of demand dropped, but its expectations for the next three months grew.

 Overall, confidence in selected services decreased month-on-month, and it is lower compared with June 2011 too.