Business cycle survey - April 2006

Balance of composite confidence indicator (indicator of economic sentiment) decreased by 0.7 point in April 2006 compared to the previous month as well as the balance of business indicator and balance of consumer confidence indicator. Compared to April 2005, the composite confidence indicator balance increased by 3.5 points, business confidence indicator balance by 2.8 points and consumer confidence indicator balance by 6.2 points.
In industry, the confidence indicator balance increased by 1.3 points month-on-month and in the year-on-year comparison it is 2.9 points up on April 2005. In construction, the confidence indicator balance decreased by 1 point m-o-m; it is 1.5 points up on April 2005. In trade, the confidence indicator balance decreased by 1.7 points and it is 2.9 point up y-o-y. In selected services, the confidence indicator balance decreased by 3 points m-o-m and it is 3 points up y-o-y.

In industry, assessment of the current economic situation further increased in April. Assessment of total demand decreased compared to the previous month, while the assessment of foreign demand remained unchanged. For next three months, in respect to the reached level of orders, respondents expect an increase in production activity as well as in employment. Stable price development is expected by 79.9% of respondents, 15.4% expect a rise and 4.7 a drop. For next three months, respondents expect a slight improvement in their economic situation; however, for next six months, expectations are cautious. The production capacity utilization in manufacturing industry remained almost unchanged compared to the previous quarter and reached 86.5%.

In construction, assessment of current economic situation did not change in April. Assessment of the demand decreased month-on-month. Nevertheless, in relation to the expected increase in the demand, respondents expect an increase in the number of employees and a rise of construction activity in next three months. Predominantly, the respondents anticipate no changes in prices; however, 21.9% of respondents will increase their prices. Construction work is secured for 9 months ahead, respondents in construction say. Expectations of economic situation are favourable for both: next three and six months.

Among respondents engaged in trade, favourable assessment of current economic situation decreased after seasonal adjustment in April. Expected development of economic situation for next six months decreased, too; however, it still reaches high level. Stock of inventories did not change, respondents say. 73.2% of respondents expect stable development of the number of employees; sale prices should not rise (85.2% of respondents expect no changes in prices).

In selected services, respondents assess their current economic situation favourably; however, assessment of demand reaches lower values. Expectations of development of the demand for next three months are cautious. Respondents, however, expect employment to increase; prices of services should not change (a price increase is expected by 9.4% of respondents, no changes by 89.8%). Expectations of economic situation decreased for next three as well as six months.

The survey taken among consumers in April indicates that they expect slight decrease in the overall economic situation (balance down by 0.2 points) but an increase in their own financial situation (balance up by 1.6 points). Compared to March 2006, the percentage of consumers expecting higher unemployment decreased (balance down by 7.5 points). Percentage of the respondents that are going to save money decreased by 11.6 points. In April, the consumer confidence indicator decreased from the high value in March by 0.7 point.Note

Contact: Marie Hörmannová, phone (+420) 274052049,
e-mail marie.hormannova@csu.gov.cz
Data source: CZSO business survey, GfK Praha consumer survey
End of data collection: 21 April 2006
End of data processing: 26 April 2006
More information at: 1201-05 Business Cycle Survey in Enterprises of Industry, Construction,
Trade and Selected Services

Methodological explanatory notes :

Since January 2006 the Composite confidence indicator (Economic sentiment indicator) is in compliance with the EU methodology presented as a weighted average of seasonally adjusted confidence indicators in industry, construction, trade, selected services and consumer confidence indicator. Business confidence indicator is a weighted average of seasonally adjusted confidence indicators in industry, construction, trade and selected services.

Since January 2006, due to the inclusion of confidence indicator in selected services, a new weighting system is being used : confidence indicator in industry has 40% weight, in construction and trade it is 5% each, in services 30% and consumer confidence indicator has 20% weight. Indicators are presented as basic indices, with the average of 2005 as a base.

Time series of composite and business confidence indicators are recalculated by the new weighting system – back to May 2002 (the beginning of the business cycle survey in selected services). Whole time series of basic indices are then recalculated to the average of 2005; data are comparable.