William Malcolm

Czech Manufacturing Slowed In July

Year-on-year growth in manufacturing and construction in the Czech Republic slowed in July this year and the result of foreign trade also deteriorated. According to the Czech Statistical Office (CSO). According to analysts, higher growth in the construction industry is hindered by a shortage of employees and building materials and high prices of materials. In foreign trade, experts expect it to reach the same surplus for the whole year as last year, although it was in deficit in June and July.

The industry slowed its year-on-year growth to seven percent in July from 11.1 percent in June. Production increased in most industries, most notably in metallurgical metals and foundry. The value of new orders increased by 18.9 percent. According to the CZSO, the results still reflect the coronavirus epidemic, which significantly affected the industry last year. “The relatively high growth rates were partly influenced by a lower base effect. However, there was also increased demand for some manufacturing products, such as steel,” said Radek Matějka, director of the CZSO’s Statistics on Agriculture and Forestry, Industry, Construction and Energy.

At today’s press conference of statisticians, the head of the CZSO industry statistics department, Veronika Doležalová, said that the vast majority of industries showed growth this year, but in a more detailed view, there are significant differences between them. “Among the sectors that did not significantly reduce or even strengthen the pandemic were, for example, other manufacturing, paper, and paper products and the pharmaceutical industry. Beverage and clothing production, on the other hand, are among the sectors that are far from pre-covid,” she stated.

Construction output slowed year-on-year growth to 0.5 percent in July. According to revised data, growth in June was 6.5 percent, the highest since April 2019. Production in construction grew in July only due to civil engineering, ie the construction of roads or telecommunications and energy networks, which strengthened by 6.8 percent. Building construction, which is the construction of residential and non-residential buildings, weakened by 2.2 percent.

According to statistics, the construction industry fell by 0.6 percent year on year from the beginning of this year to the end of July. Building construction has weakened by 2.2 percent so far this year, and civil engineering has strengthened by four percent.

“Unlike industry, construction did not experience such a sharp decline in connection with covid. At the beginning of 2020, it still showed relatively good results and the overall decline in production was dampened by civil engineering. statistics on construction and housing construction CZSO Petra Cuřínová. “Unfortunately, even in 2021 it was not possible to start a stable growth of construction output, and in the first seven months it was roughly at the same level as a year ago,” she added. However, according to the CZSO, there are still preconditions for a favorable development in industry and construction. The indicative value of issued building permits and the volume of concluded orders have been growing for a long time.

According to analysts, construction companies have recently been hampered by the increase in the price of building materials and their lack. “Under current conditions, some of these orders may become so unprofitable for companies that they would rather withdraw from them,” said ČSOB analyst Petr Dufek. According to BH Securities analyst Štěpán Křeček, companies prefer to work on larger projects, which are often commissioned by the public sector. “On the contrary, smaller private contracts are being crowded out because they lack approved budgets. Construction companies are failing to meet approved budgets because materials are becoming more expensive,” he said.

The Czech Republic’s foreign trade showed a deficit of 7.2 billion crowns in July. In a year-on-year comparison, its result was 21.3 billion worse. “The main reason was the high year-on-year growth in the value of imports, mainly due to higher price levels for oil and natural gas. Exports rose 4.3 percent year on year to 299.8 billion and imports by 12.3 percent to 307.1 billion.

Today, in addition to the July data, the CZSO published definitive data on the Czech Republic’s foreign trade balance in 2020. It ended with a surplus of 179.9 billion compared to 145.7 billion in 2019.

Despite the June and July deficits, experts assume that the Czech Republic’s foreign trade will end for the whole year, similarly to last year, in a surplus of around 180 billion crowns. “On the one hand, supply complications persist, with many companies being forced to shut down part of production, which has a negative impact on export performance. On the other hand, the domestic economy is in a phase of recovery, which is mainly driven by household consumption and investment, especially in inventories, “said Raiffeisenbank analyst David Vagenknecht.

The director of the services section for exporters of the state agency CzechTrade, Jan Kubata, sees the renewal of trade fairs in physical form as one of the pillars for a sharper increase in exports. “Trade fairs are essential not only for experienced exporters, but especially for companies that want to start exporting, and thus get the opportunity to present their products directly abroad and address potential clients, partners or investors,” he said.