Business cycle survey - March 2007

In March 2007, the balance of composite confidence indicator (economic sentiment indicator), compared to the previous month, increased by 1 point. The balance of business indicator increased by 1.1 point. The balance of consumer confidence indicator increased by 0.9 points. In March 2007, all three indicators reached their record value. Compared to March 2006, the composite confidence indicator balance increased by 5.5 points, the confidence of entrepreneurs is by 6.4 points up, and the one of consumers is up by 1.8 points.

In industry, the assessment of current economic situation increased slightly compared to the previous month . The assessment of aggregate demand increased as well as the assessment of foreign demand. According to respondents, the finished goods stocks increased. For the period of the next three months, respondents expect no changes in production activity and an increase in employment. For the period of the next three as well as six months the expectations of economic situation are higher than in February. All in all, the balance of confidence indicator in industry increased by 2 points m-o-m and by 7 points y-o-y compared to March 2006.

In construction, the assessment of current economic situation slightly decreased m-o-m. The assessment of aggregate demand did not change. For the period of the next three months, the respondents expect no changes in construction activity and predominantly count on no changes in prices; yet, almost one third of them expect a rise in prices. Respondents estimate they have work secured by contracts for 9 months ahead. Expectations of economic situation development for the period of the next three as well as six months are, compared to high values in previous months, lower. All in all, the confidence indicator balance in construction did not change m-o-m and is 3.5 points up y-o-y.
Among respondents engaged in trade, assessment of current economic situation increased compared with February. Expectations of economic situation development for the period of the next three months did not change, for the next six months they are lower. According to respondents, the goods stocks did not change in March. All in all, the confidence indicator balance did not change m-o-m and is 4.4 points up y-o-y compared to March 2006.
In selected services, assessment of current economic situation did not change in March, according to respondents. Assessment of demand increased. Expectations of demand development for the period of the next three months are, however, lower. Expectations of economic situation development for the period of the next three as well as six months are higher than in February. All in all, the confidence indicator balance in selected services increased by 0.3 point m-o-m and is by 6.6 points up y-o-y compared to March 2006.
The survey taken among consumers in March indicates, that consumers expect improvement of both the general economic situation and their own financial standing. Compared to February 2007, the percentage of consumers expecting higher unemployment, decreased. Percentage of respondents planning to save money declined from a high value in previous month. Most frequent types of saving are construction saving, current account, pension saving and live insurance. The consumer confidence indicator increased generally by 0.9 point m-o-m and is by 1.8 points up 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
End of data collection: 20 March 2007
End of data processing: 23 March 2007
Related publication: 1201-06 Business Cycle Survey in Enterprises of Industry, Construction,
Trade and Selected Services
(Publications available also at http://www.czso.cz/csu/czso/2-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.