Business cycle survey - January 2006

Balance of composite confidence indicator (indicator of economic sentiment) increased by 1.4 point in January 2006 compared to the previous month. Balance of business indicator increased by 0.4 point. Balance of consumer confidence indicator increased markedly (by 5.7 points). Compared to January 2005 composite confidence indicator balance increased by 2.9 points, business confidence indicator balance increased by 2.0 points and consumer confidence indicator balance increased by 6.5 points.
Note: There is an adjustment to the methodology of calculating the composite and business confidence indicators – for more information see the methodological note and methodological explanatory notes.

In industry, the confidence indicator balance did not change month-on-month and in the year-on-year comparison it is 0.7 point up on January 2005. In construction, the confidence indicator balance decreased by 1.5 points m-o-m due to expected decrease in number of employees and is also down on January 2005. In trade, the confidence indicator balance decreased 3.4 points from the high value of previous month and is 1 point down y-o-y. In selected services, the confidence indicator balance increased by 1.7 points m-o-m and is 6.4 points up y-o-y.

In industry, favourable assessment of the current economic situation prevails in January. For next three months, respondents expect – compared to the current situation – a decrease in the total demand and no changes in external one. At stable development of production activity, 28.6% of respondents count on a decrease in the employment. Stable price development is expected by 72.0% of respondents. For next three months, respondents expect no changes in their economic situation, while in next six months the economic situation is expected to improve. The production capacity utilization in manufacturing industry decreased slightly in January 2006 compared to the previous quarter and reached 86.4%.

In construction, favourable assessment of current construction activity continues in January. Due to expected decrease in the demand, respondents expect a decrease in the number of employees in next three months. On the whole, the respondents expect no changes in prices; however, 30.2% of respondents will increase their prices. Respondents in construction have the construction works secured for 9 months ahead. Economic situation is favourable both currently and for next six months.

Among respondents engaged in trade, the assessment of current economic situation decreased compared to the very good values in previous two months. For next three and six months, expectations of favourable development of economic situation prevail; demands on suppliers will rise. 80.5% of respondents expect stable development of the number of employees; sale prices should not rise (76.4% of respondents expect no changes and 14.6 % a drop).

In selected services, respondents expect favourable development of demand in next three months (these expectations were expressed by 64.4% of respondents, 28.8% expect a rise and only 6.1% a drop). Respondents expect employment to decrease; on the other hand, prices will remain stable at 92.6% of respondents. Both assessment of economic situation and its expectations for next six months are high.
The survey taken among consumers in January suggests an increase in both expected overall economic situation (balance up by 8.3 points) and in their financial situation (balance up by 5.5 points). Compared to December 2005, the percentage of consumers expecting higher unemployment decreased (balance down by 7.3 points). The percentage of the respondents going to save money increased. In January the consumer confidence indicator reached the highest level 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: 20 January 2006
End of data processing: 24 January 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 weight 40%, in construction and trade 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.