Business cycle survey - July 2007

In July 2007, the balance of composite confidence indicator (economic sentiment indicator) decreased by 1 point, compared to the previous month, as well as the balance of business indicator. The balance of consumer confidence indicator decreased by 0.7 point. Compared to July 2006, the composite confidence indicator balance increased by 0.6 point, the confidence of entrepreneurs is by 2 points up; the one of consumers is down by 4.6 points.

In industry, the assessment of current economic situation improved slightly compared to the previous month . The assessment of aggregate as well as foreign demand went up as well. According to respondents, the finished goods stocks increased markedly. For the period of the next three months, respondents expect no changes in production activity. As for the economic situation, respondents’ expectations for the next three months are almost as high as in June, for the period of the next six months they are lower. Production capacity utilization in manufacturing industry reached 88.6%. All in all, the balance of confidence indicator in industry decreased, due to increase in stocks, by 1.4 point m-o-m (in June it reached its highest value since June 2000). It is 5.3 points up y-o-y.

In construction, the assessment of current economic situation did not change m-o-m. The assessment of total demand increased. For the period of the next three months, the respondents expect slow down of construction activity and count on rise in prices of construction works. Respondents estimate they have work secured by contracts for 9 months. Expectations of the economic situation development for the period of the next three months are almost the same as in June; for the next six months they are lower. All in all, the confidence indicator balance in construction increased by 0.5 point m-o-m, but it is 3 points down y-o-y.

Among respondents engaged in trade, assessment of current economic situation improved slightly compared with June. Expectations of the economic situation development for the period of the next three months decreased compared to June, for the period of the next six months they did not change. According to respondents, the finished goods stocks did not change in July. All in all, the confidence indicator balance increased by 0.3 point m-o-m, by which it reached its second highest value again; it is 6.7 points up y-o-y.

In selected services, assessment of current economic situation did not change in July, according to respondents. Assessment of demand decreased as well as its expectations for the period of the next three months. Expectations of the economic situation development for the period of the next three months are almost the same as in June, for the next six months they are lower. All in all, the confidence indicator balance in selected services decreased by 1 point m-o-m and it is by 2.4 points down compared to July 2006.

The survey taken among consumers in July indicates that compared to June, consumers expect for the next twelve months weakening of both the general economic situation and their own financial standing. Consumers’ expectations of unemployment remain low in spite of a slight increase. Percentage of respondents planning to save money increased slightly. The consumer confidence indicator decreased by 0.7 point compared to the previous month and it is by 4.6 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: 24 July 2007
End of data processing: 27 July 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.