Business cycle survey - August 2006

The balance of composite confidence indicator (indicator of economic sentiment) increased by 1.6 points in August 2006 compared to the previous month, the balance of business indicator increased by 2.1 points; both balances thus reached the highest values in their history. The balance of consumer confidence indicator decreased very slightly (by 0.1 points) and in spite of that it reached the third highest value in its history. Compared to August 2005, the composite confidence indicator balance as well as the business confidence indicator balance increased by 7.7 points and the consumer confidence indicator balance increased by 7.6 points.
In industry, the confidence indicator balance increased by 3 points month-on-month and by 7 points year-on-year. In construction, the confidence indicator balance was down by 1 point m-o-m and up by 6.5 points y-o-y. In trade, the confidence indicator balance improved by 0.7 points m-o-m and by 3.3 points y-o-y. In selected services, the confidence indicator balance was up by 1.6 points m-o-m and up by 9.6 points y-o-y.

In industry, favourable assessment of the current economic situation improved further in August . The assessment of total demand increased compared to the previous month; the assessment of foreign demand increased too. Stocks of finished goods decreased, respondents say. For next three months, respondents expect a favourable development of production activity under an almost stable development of employment. Stable prices are expected by 81.7% of respondents, 15.9% expect a rise and 2.4% a drop. Like in July, the respondents expect equally favourable development of their economic situation in next three and next six months. Overall, the confidence indicator in industry increased to the highest value since June 2000; the balance reached 13 points.

In construction, favourable assessment of the current economic situation kept on in August. The assessment of overall demand did not change against July. In comparison with July, assessment of current construction activity improved markedly. For next three months, i.e. for the autumn construction season, the respondents expect a slowdown of the growth of both employment and construction activity. Anticipation of no price changes predominates, according to 85.9% of respondents. The respondents say they have work secured for 9.8 months ahead. Expectations of economic situation development for next three months are cautious, for next six months favourable.

Among respondents engaged in trade, assessment of the current economic situation increased slightly m-o-m in August. Expectations of economic situation development for next three months are the same as in July; for next six months are lower. According to respondents, stock of inventories decreased in August (affected also by end-of-season sales). A stable development of the number of employees is expected by 77.7% of respondents, 15.4% expect a rise and 6.9% a drop. A rise in prices is expected by only 3.5% of respondents, 84.5% expect no changes and 12.0% a decrease.

In selected services, respondents assess their current economic situation favourably in August; assessment of demand increased. Expectations of demand development for next three months decreased slightly. For next three months, a rise in employment is expected by 16.2% of respondents, 50.4% expect no changes and 33.4% a drop. Expectations of economic situation are reserved for next three months and favourable for next six months.

The survey taken among consumers in August indicates that consumers expect deterioration of both the overall economic situation (balance down by 2.1 points) and their own financial situation (balance down by 4.6 points). Compared to July 2006, the percentage of consumers expecting higher unemployment decreased. Percentage of the respondents who intend to save money grew by 2.1 points. The consumer confidence indicator decreased by 0.1 points overall in comparison to July and yet it still remains on the third highest value in its history (since January 1998).

---

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 August 2006
End of data processing: 24 August 2006
Related publication: 1201-06 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 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 indicators 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 basic indices are then re-based to the average of 2005; the data are comparable.