Business cycle survey - July 2004
Growth in confidence of entrepreneurs and consumers slowed down
Publication Date: 29. 07. 2004
Product Code: r-1201-04
In July 2004 the composite confidence indicator balance decreased slightly in comparison to the previous month, which was caused by both the business and consumer confidence indicator. Despite a slight decrease the confidence indicators remain on the long-term favourable values.
In industry (934) 37% of respondents considered their economic situation in July good, 60% satisfactory and 3% bad, which is a worse result than in June. After seasonal adjustment, the assessment of current total demand (order books) for enterprise output decreased slightly compared to the assessment in June (balance 1 pt. down). The assessment of current foreign demand (order books) for enterprise output decreased against June, too (balance 2 pts. down). Finished goods stocks decreased, the respondents say. Capacity utilisation reached in July 86% and is 1 point higher than in the previous four quarters.
The respondents expect a slowdown of production activity in next three months (balance 7 pts. down) and almost no changes in employment. In next six months to come they expect worsening of their economic situation. All the data seasonally adjusted.
On the whole, the confidence indicator in industry decreased by 2 points against the previous month. Compared y-o-y, it is 9 points up on July 2003 and in the long-term comparison it reaches high values.
In construction enterprises (442) the assessment of the current economic situation improved in July (after seasonal adjustment) against June (balance 7 pts. up). The assessment of total demand (order books) for enterprise output worsened after a high assessment in the previous months (balance 11 pts. down). In next three months the respondents expect a slowdown of construction activity at a slight decrease of employment (balance 1 pt. down). The overall confidence indicator in construction decreased compared to the previous month; in the y-o-y comparison, it reaches the same value as in July 2003.
Of respondents engaged in trade (319) 45% considered in July the economic situation of their enterprises good, 51% corresponding to the season and 4% bad, which is a 5-point decrease of the balance in comparison to June (seasonally adjusted). Respondents signal unchanged amount of stocks. Unchanged price development is expected by 79% respondents, 12% expect growth and 9% expect drop. Respondents express favourable expectations for the end of the year; in next six months to come 55% of respondents predict improvement in the economic situation (40% in June), 44% anticipate no changes (59% in June) and 1% expect worsening (the same as in June). The overall confidence indicator in trade increased by 2 points when compared to June and is 6 pts. up on July 2003.
In selected services (733) 64% of the respondents assessed their current economic situation in July to be good, 35% of them saw the situation adequate to the season and 1% saw it bad, which is a slightly worse assessment than in June. 37% of the respondents expected a rise in demand for enterprise output (order books), and 59% or 4% of respondents anticipated an unchanged or worse situation, respectively, which is a worse expectation than in June. No changes in prices should occur according to 88% of respondents, 10% envisage a rise and 2% a decrease in prices. A decrease in the number of employees is expected by 28% of respondents, no changes are expected by 62% of them, and 10% of the respondents expect an increase. The overall confidence indicator in selected services has not changed, but is 6 pts. up on July 2003.
A survey taken in consumers (1000) in July suggests a decrease of the balance of expectation of the total economic situation and an improvement in their financial situation in next twelve months . The expected total economic situation balance decreased by 1 point and the balance of expected consumers´ financial situation increased by 3 points. The share of consumers expecting an increase of unemployment increased compared to June, and the balance increased by 3 points. The share of consumers intending to save money decreased (balance 4 pts. down). Compared to the last month, the overall consumer confidence indicator decreased by 1 point and is 6 pts. up on July 2003.
Methodological notes:
Contact: Marie Hörmannová, phone (+420) 274052049,
e-mail hormannova@gw.czso.cz
Source: CZSO business surveys, GfK Praha consumer survey
End of data collection: 23 July 2004
End of data processing: 27July 2004
For more information see: https://csu.gov.cz
Methodological explanatory notes :
The composite confidence indicator is a weighted average of seasonally adjusted confidence indicators in industry, construction, trade, and of the consumer confidence indicator. The composite business confidence indicator is a weighted average of seasonally adjusted confidence indicators in industry, construction and trade. The confidence indicator in industry has a double weight. Since January 2002, the consumer confidence indicator has been composed of four indicators (expected financial situation of consumers, expected total economic situation, expected total unemployment (with inverted sign) and savings expected in 12 months to come). Since January 2003, the confidence indicators have been presented as basic indices; the base being the average of 1995.
The branch confidence indicators are constructed as averages of seasonally adjusted weighted business cycle balances. The business cycle balance is the percentage difference between the responses “growth (+)” and “fall (-)”. The confidence indicator for industry is the average of seasonally adjusted balances of three indicators (the assessment of total demand, stocks of final production (with inverted sign) and the expected development of production activity). The confidence indicator for construction is the average of two indicators (the assessment of total demand and the expected development of employment). The confidence indicator for trade is the average of three indicators (the assessment of economic situation, stocks (with inverted sign) and the expected development of economic situation). The business cycle survey in selected services has been conducted by the Czech Statistical Office since May 2002. This is why the time series are not seasonally adjusted. Data for hotels and restaurants are included in the data for selected services. The time series are converted and the data are comparable. The confidence indicator for selected services is the average of three indicators (the assessment of economic situation, the assessment of demand and expected demand). The confidence indicator for selected services is not being included into composite indicators, yet.
The data above were derived in a weighted manner: sales were used as weights for industry, services and trade, whereas construction work of contractors and subcontractors was the weight for construction. The responding groups of enterprises account for more than a half of sales (industry) and volume (construction) and for a quarter of sales in trade.