Confidence in the Czech economy fell in July after three months of growth. Compared to June, it decreased by 4.3 points to 99.7 points, the Czech Statistical Office informed today on its websiteorder (CZSO). According to him, the decline in overall confidence is due to the shortage and rising prices of materials and equipment in industry. At the same time, confidence fell not only among entrepreneurs, but also among consumers. In year-on-year comparison, all values are higher.
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For consumers, confidence in the economy decreased by 3.6 points month-on-month to 101.9 months in the first holiday month, and for entrepreneurs by 4.4 points to 99.3 points.
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The survey points to weaknesses in the Czech economy, which this year are problems with logistics and missing employees.
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“Overall, the July survey points to weaknesses in the Czech economy, which this year are problems with logistics and missing employees. It is therefore likely that in the coming months we will see a slowdown in the production of the largest domestic sector – industry, however, the recovery in services should ensure the continuation of economic growth in the Czech Republic, “said ČSOB analyst Petr Dufek.
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According to the head of the CZSO Business Tendency Department, Jiří Obst, companies perceive the shortage and rising prices of input materials and equipment in industry as a significant barrier to their activities. “Production is slowing down in the sectors concerned and stocks of work in progress are increasing significantly. In response, the number of industrial enterprises expecting growth in production activity in the coming period decreased slightly, “said Obst. Consumers are then significantly afraid of further price increases, which they are beginning to perceive as one of the possible factors threatening the overall economic situation and their own financial situation, added Silvie Vyplašilová from the CZSO Business Tendency Survey.
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At the moment, uncertainty is largely caused by the raw material crisis, which is associated with rising prices, which, in addition to industrialists, are already being felt by consumers.
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“The previous increase in confidence can be seen in the July data as a certain correction of optimism rather than a new trend,” said Michal Brožka, an economist at Komerční banka. According to Jan Hadrava, Director of Strategic Consulting at PwC Czech Republic, the results of the survey can be expected to fluctuate for some time. “Currently, the uncertainty is largely caused by the raw material crisis, which is associated with rising prices, which, in addition to industrialists, are already being felt by consumers. However, both again have their origins in a pandemic, which caused several shocks to the economy and creates shock waves in demand, which is especially difficult for industries with a longer production and supply cycle to cope with, “he said.
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Confidence among industrial enterprises fell by 9.5 points month-on-month in July to 98.7. According to statisticians, the number of entrepreneurs in the industry has decreased, assessing their current demand as more than satisfactory and who expect the growth rate of production to grow in the next three months. On the contrary, stocks of finished products increased significantly compared to June. “The main barrier to production growth, mentioned by about 33 percent of respondents, the most since the beginning of the survey, is the lack of materials and equipment, followed by a shortage of staff, which limits 20 percent of respondents,” said statistics.
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According to the chairwoman of the National Budget Council, Eva Zamrazilová, the shortage of raw materials and components is temporary. “Only after a longer permanent start of full capacities in these fields will the current excess demand be stabilized,” she said.
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Confidence in the economy also fell among construction companies, by 1.8 points to 114.0. According to the CZSO, entrepreneurs in the field expect, among other things, a more significant increase in the price of construction work, and the main obstacles to production growth are a lack of employees and insufficient demand for them.
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Confidence between traders and companies in the service sectors, including the banking sector, did not change month-on-month, remaining at 104.7 and 97.6 points, respectively. However, the number of companies expecting an improvement in their economic situation in the next three months also decreased in trade. At the same time, traders expect an increase in sales prices in the coming months.
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