Czech industrial output was not disappointing in May

Czech industrial output was not disappointing in May despite its relatively low rise, however, industry will cool down in the second half of this year, analysts approached by CTK said pointing out the significant growth in new orders.

Industrial output decelerated its annual growth to 1.4 percent in May, down from 5.5 percent in April, the Czech Statistical Office (CSU) said today. The value of new orders in selected activities increased annually by 9.5 percent.

Industry showed a decent rise in May, considering the strong comparison basis, Akcenta company analyst Miroslav Novak said.

"In the coming months, we expect a stable industry development, with the rate slowing down," the Confederation of Industry economic policy head Bohuslav Cizek said. The May data illustrate good condition of the Czech economy in the first half of 2018, with the economy developing as expected, he added.

Czech industry is following the German trend, Komercni banka analyst Viktor Zeisel said.

Domestic production was supported by the very warm weather, with supplies of electricity, gas, steam and air conditioning growing.

The production of motor vehicles has dropped for the second time this year, reporting a below-average rise compared to the overall output in the first five months of this year, UniCredit Bank analyst Patrik Rozumbersky said.

Car production stopped being a key driver of the Czech Republic's industry this year.

Industrial output is expected to add 3 percent on average this year, which would be less than a half the rate registered last year, Rozumbersky said.

The biggest challenge of industry is still maintaining competitiveness amid the fastest-growing real wages since 2003 and an ongoing lack of employees, Raiffeisenbank analyst Frantisek Taborsky said.

Weakening foreign demand and rising domestic interest rates reflected in higher loan costs represent risks.

Combined with the stronger Czech crown, there is less room for companies with a lower value added, which have survived thanks to the Czech National Bank's (CNB) loose monetary policy with an exchange rate commitment and zero interest rates, Taborsky said.

Source: CTK