Business cycle survey - December 2007

In December 2007, the balance of composite confidence indicator (economic sentiment indicator) decreased by 1.1 point compared to November 2007 namely due to the drop in consumer confidence indicator. The balance of business indicator fell by 0.4 point. The balance of consumer confidence indicator decreased by 3.7 points. Compared to December 2006, the composite confidence indicator balance dropped by 4.4 points, the confidence of entrepreneurs is 1.6 point down; the confidence of consumers is down by 15.8 points.


*) With the exception of consumer indicator, all the data are calculated from seasonally adjusted balances.

In industry, the assessment of overall economic situation decreased slightly in December, however, the assessment of production activity improved. The assessment of both total and external demand was less favourable in December, yet it is still high. According to respondents, stocks increased slightly. For the next three months respondents expect favourable development in production activity and employment to continue. For the next three as well as six months, expectations of economic situation are lower than in November. Overall, the confidence indicator balance in industry decreased by 0.7 point, m-o-m; however, in the year-on-year comparison it is 1 point up.

The survey on investment activity taken among industrial enterprises suggests that the level of investment in manufacturing industry in 2008 should be higher than in 2007 (approximately by 8%). It regards both: renewal of original equipment or operation and extension of production capacities.

In construction, the assessment of the current economic situation decreased, m-o-m, from a very high value in November. On the other hand, the assessment of current total demand increased. For the period of the next three months respondents expect after seasonal adjustment a favourable development of employment. Respondents estimate they have work secured by contracts for 8.9 months ahead. Expectations of the economic situation development for the period of the next three months are the same as in November, for next six months they are slightly lower. Overall, the confidence indicator balance in construction increased by 3 points, m-o-m, reaching the highest value in its history; it is 3.5 points up, y-o-y.

In trade, high assessment of current economic situation continued in December, even though it decreased compared to November. According to respondents, also the finished goods stocks decreased in December. Expectations of the economic situation development for the period of the next three months (time of seasonal sales) increased, however, for the period of the next six months they were lower. Overall, the confidence indicator balance decreased by 3 points in December; yet it still reaches high values. It is 5 points up, y-o-y.

In selected services, according to respondents, the assessment of current economic situation decreased in December. The assessment of demand increased slightly, m-o-m, like its expectations for the period of the next three months. Also the expectations of the economic development for the period of the next three as well as six months are more favourable than in November. Overall, the confidence indicator balance in selected services decreased slightly, m-o-m, (by 0.3 point) due to the assessment of current situation, i.e. 7 points down compared to December 2006.

The survey taken among consumers in December indicates that, compared to November, consumers expect for the next twelve months worsening of the general economic situation and namely of their own financial standing. The long-term favourable expectations of unemployment worsened as well. The percentage of respondents planning to save money dropped. The consumer confidence indicator decreased by 3.7 points, m-o-m, down to its lowest value since April 2004. In the year-on-year comparison it is 15.8 points down.






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: 21 December 2007
End of data processing: 28 December 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 seasonally non-adjusted 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.