Business cycle survey - April 2007

In April 2007, the balance of composite confidence indicator (economic sentiment indicator), compared to the previous month, when it reached its maximum, decreased by 1.2 point. The balance of business indicator decreased by 0.4 point to the third highest value in its history. The balance of consumer confidence indicator decreased by 4.5 points. Compared to April 2006, the composite confidence indicator balance increased by 5 points, the confidence of entrepreneurs is by 6.7 points up, and the one of consumers is down by 2 points.

In industry, the assessment of current economic situation improved slightly compared to the previous month . The assessment of aggregate demand improved as well as the assessment of foreign demand. According to respondents, the finished goods stocks decreased. For the period of the next three months, respondents expect slower increase in production activity and employment; two thirds of them count on stability. For the period of the next three as well as six months the expectations in respect of economic situation are lower than in March. Production capacity utilization in industry decreased slightly compared to the previous quarter and reached 87.8%. All in all, the balance of confidence indicator in industry decreased by 0.3 point m-o-m and increased by 5.4 points compared to April 2006.
In construction, the assessment of current economic situation slightly improved m-o-m. The assessment of aggregate demand improved as well. For the period of the next three months, the respondents expect that the reached level of construction activity will remain the same and predominantly count on no changes in prices; yet, a third of them expect that the prices will go up. Respondents estimate they have work secured by contracts for 9.1 months. Expectations of economic situation development for the period of the next three as well as six months are, compared to high values in previous months, lower. All in all, the confidence indicator balance in construction increased slightly m-o-m (by 0.5 point) and is 5 points up y-o-y.

Among respondents engaged in trade, assessment of current economic situation improved compared with March. Expectations of economic situation development for the period of the next three months have not changed, for the next six months they are higher. According to respondents, the finished goods stocks decreased in April. All in all, the confidence indicator balance increased by 2 points m-o-m to the highest value in its history which is 8.1 points up y-o-y.
In selected services, assessment of current economic situation did not change in April, according to respondents. Assessment of demand improved. Expectations of the demand development for the period of the next three months are, however, lower. Expectations of the economic situation development for the period of the next three as well as six months are lower than in March. All in all, the confidence indicator balance in selected services decreased by 1.3 point m-o-m, from its highest value, but it is by 8.3 points up compared to April 2006.
The survey taken among consumers in April indicates, that consumers expect worsening of both the general economic situation and their own financial standing. Compared to March 2007, the percentage of consumers expecting higher unemployment, increased slightly. Percentage of respondents planning to save money increased. Consumers consider current time as appropriate for buying. The consumer confidence indicator decreased by 4.5 point compared to the previous month, when it reached its maximum, and is by 2 points down y-o-y.

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Note

Contact: Marie Hörmannová, phone (+420) 274052049,
e-mail: marie.hormannova@csu.gov.cz
Data source: CZSO business survey, GfK Praha consumer survey
Business and Consumers Surveys are co-financed by grant agreements
of the European Commission DG ECFIN
End of data collection: 23 April 2007
End of data processing: 25 April 2007
Related publication: 1201-07 Business Cycle Survey in Enterprises of Industry, Construction,
Trade and Selected Services
(Publications available also at /1-ep-1 )

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. Composite 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 has been used : confidence indicator in industry is assigned the weight of 40%, in construction and trade 5% each, in services 30%, and consumer confidence indicator is assigned the weight of 20%. Indicators are presented as basic indices, the base being the average of 2005.
Time series of composite and business confidence indicator are recalculated, using the new weighting system – back to May 2002 (the beginning of the business cycle survey in selected services). The whole time series of base indices are then re-based to the average of 2005; the data are comparable.