Business cycle survey - April 2005
Confidence of entrepreneurs is decreasing already for four months
Publication Date: 27. 04. 2005
Product Code: r-1201-05
The composite confidence indicator balance decreased by 2 points in April 2005 compared to the previous month; the business confidence indicator balance decreased by 2 points, too, and the consumer confidence indicator balance decreased by 1 point. In comparison to April 2004, the balance of composite confidence indicator was higher by 2 points; the business confidence indicator balance was lower by 1 point and the balance of consumer confidence indicator was higher by 11 points.
In industry (928 respondents), 38% of the respondents considered their economic situation in April good, 59% satisfactory and 3% bad, which is after seasonal adjustment a worse result than in March (balance 2 points down). The assessment of current total demand (order books) for enterprise output increased compared to the assessment in March (balance 2 points up). The assessment of current foreign demand increased, too (balance 1 point up). Stocks of finished goods increased, the respondents say (balance 4 points up). In next three months, the respondents expect the production activity to slow down (balance 5 points down) and employment to decrease (balance 2 points down). In next six months, they expect their economic situation to decrease slightly (balance 1 point down). All the data are seasonally adjusted.
On the whole, the balance of confidence indicator in industry decreased by 2 points both month-on-month and year-on-year.
In construction enterprises (560 respondents), 51% of the respondents considered the economic situation of their enterprise in April good, 44% as satisfactory and 5% bad; this translates into a decrease in comparison to March after seasonal adjustment (balance 8 points down). The assessment of current total demand (order books) for enterprise output decreased, too (balance 6 points down). For next three months , respondents’ expectations are favourable, however after seasonal adjustment they are lower than it is usual for this season; after seasonal adjustment the respondents expect the construction activity to slow down (balance 2 points down) with the employment growing (balance 3 points up). In next six months, the respondents expect their economic situation to improve (balance 4 points up) – all seasonally adjusted. Generally, the balance of confidence indicator in construction decreased by 1 point month-on-month and it is 2 points down on April 2004.
Of respondents engaged in trade (325 respondents), 41% considered the economic situation of their enterprise in April good, 55% as corresponding to the season and 4% bad. Month-on-month, this translates into a decrease in the balance by 10 points after seasonal adjustment. All in all, trade increased its stock of inventories (balance 5 points up). Unchanged price development is expected by 81% of the respondents, while 8% expect prices to grow and 11% to drop. In next six months , 42% of the respondents predict improvement in the economic situation (37% in March), 54% anticipate no changes (58% in March) and 4% expect worsening (5% in March). The overall balance of confidence indicator in trade decreased in comparison to March by 4 points; however, it was 3 points up on April 2004.
In selected branches of services (789 respondents), 59% of the respondents assessed their current economic situation in April as good, 39% as corresponding to the season and 2% as bad, which was a better assessment than in March. 39% of the respondents expect the demand to rise (order books), while 58% anticipate no changes and 3% assume that the demand will decrease; this expectation is better than in March. According to 90% of the respondents no changes in price development should occur, 4% envisage a rise in prices and 6% a drop. The number of employees is expected to decrease (26% of the respondents), remain unchanged (62%) or increase (12% of the respondents). The overall balance of confidence indicator in selected branches of services increased by 3 points and in the y-o-y comparison it is 3 points down on April 2004.
Contact: Marie Hörmannová, phone (+420) 274052049,
e-mail hormannova@gw.czso.cz
Data source: CZSO business surveys, GfK Praha consumer survey
End of data collection: 21 April 2005
End of data processing: 25 April 2005
Methodological explanatory notes :
The composite confidence indicator is a weighted average of seasonally adjusted confidence indicators in industry, construction, trade, and of the consumer confidence indicator. The composite business confidence indicator is a weighted average of seasonally adjusted confidence indicators in industry, construction and trade. The confidence indicator in industry has a double weight. Since January 2002, the consumer confidence indicator has been composed of four indicators (expected financial situation of consumers, expected total economic situation, expected total unemployment (with inverted sign) and savings expected in 12 months to come). Since January 2003, the confidence indicators have been presented as basic indices; the base being the average of 1995.
The branch confidence indicators are constructed as averages of seasonally adjusted weighted business cycle balances. The business cycle balance is the percentage difference between the responses “growth (+)” and “fall (-)”. The confidence indicator for industry is the average of seasonally adjusted balances of three indicators (the assessment of total demand, stocks of final production (with inverted sign) and the expected development of production activity). The confidence indicator for construction is the average of two indicators (the assessment of total demand and the expected development of employment). The confidence indicator for trade is the average of three indicators (the assessment of economic situation, stocks (with inverted sign) and the expected development of economic situation). The business cycle survey in selected services has been conducted by the CZSO since May 2002. This is why the time series are not seasonally adjusted. Data for hotels and restaurants are included in selected services. The time series are converted and the data are comparable. The confidence indicator for selected services is the average of three indicators (the assessment of economic situation, the assessment of demand and expected demand). The confidence indicator for selected services is not being included into composite indicators, yet.
The data above were derived in a weighted manner: sales were used as weights for industry, services and trade, whereas construction work of contractors and subcontractors was the weight for construction. The responding groups of enterprises account for more than a half of sales (industry) and volume (construction) and for a quarter of sales in trade.