Business cycle survey - May 2004
Confidence of consumers and entrepreneurs continues to increase
Publication Date: 27. 05. 2004
Product Code: r-1201-04
In May 2004 the composite confidence indicator balance increased again compared to the previous month and thus reached the highest value since June 2001 in the long-term comparison. Its value was positively influenced by both the business and consumer confidence indicator. The most favourable assessment of the situation was made by entrepreneurs in construction; favourable assessment continued in May also in industry.
In industry (939) 37% of respondents considered their economic situation in May good, 60% satisfactory and 3% bad, which is a better result than in April. After seasonal adjustment, the assessment of current total demand (order books) for enterprise output remained almost unchanged compared to the assessment in April (balance 1 pt. down). The assessment of current foreign demand (order books) for enterprise output slightly worsened against April (balance 3 pts. down). Finished goods stocks remained almost unchanged, the respondents say.
The respondents expect decrease of production activity in next three months (balance 2 pts. down), improved development of employment and no changes in their economic situation. In next six months to come they expect improvement of their economic situation (balance 2 pts. up). All the data seasonally adjusted.
On the whole, the confidence indicator in industry decreased by 1 point against the previous month. Compared y-o-y, it is 2 points up on May 2003 and in the long-term comparison it continues to reach high values.
In construction enterprises (457) 51% of the respondents considered in May the economic situation of their enterprises good, 44% satisfactory and 5% bad, which is a better assessment than in April . After seasonal adjustment, the assessment of domestic demand (order books) for enterprise output increased as well (balance 10 pts. up). The assessment of foreign demand (order books) worsened (balance 7 pts. down). In next three months the respondents expect growth of construction activity by 4 points and at the same time increasing of employment by 3 points. The overall confidence indicator in construction significantly increased compared to the previous month (balance 7 pts. up); it increased in the y-o-y comparison as well (balance 8 pts. up).
Of respondents engaged in trade (327) 44% considered in May the economic situation of their enterprises good, 55% corresponding to the season and 1% bad, which is a 2 points decrease of the balance in comparison to April (seasonally adjusted). Respondents signal increased amount of stocks (balance 2 pts. up). In the next three months , respondents expect an increased demand and thus growth of sales of goods. Unchanged price development is expected by 74% respondents, 15% expect growth and 11% expect drop. In next six months to come 59% of respondents anticipate no changes in the economic situation (67% in April), 39% predict improvement (28% in April) and 2% expect worsening (5% in April). The overall confidence indicator in trade increased when compared to April.
In selected services (744) 61% of the respondents assessed their economic situation in May to be good, 38% of them saw the situation adequate to the season and 1% saw it bad, which is the same assessment as in April. 44% of the respondents expected a rise in demand for enterprise output (order books), and 53% or 3% of respondents anticipated an unchanged or worse situation, respectively, which is better expectation than in April. No changes in prices should occur according to 69% of respondents, 27% envisage a rise and 4% a decrease in prices, which is also better expectation than in April. A decrease in the number of employees is expected by 28% of respondents, no changes are expected by 61% of them, and 11% of respondents expect an increase. The overall confidence indicator in selected services increased.
An investment activities survey suggests that investments should grow in industry in 2004 (14% up). Investment expectations in selected services for 2004 are similar (13% up). Main factors influencing investment decisions include demand and financial sources, the respondents say. The renewal and extension of existing capacities and the construction of new ones are areas invested in.
A survey taken in consumers (1000) in May suggests an improvement of the balance of expectation of the total economic situation and their financial situation in next twelve months . The expected total economic situation balance increased by 13 points and the balance of expected consumers´ financial situation increased by 3 points. The share of consumers expecting an increase of unemployment decreased compared to April, and the balance decreased by 6 points. The share of consumers intending to save money increased (balance 4 pts. up). The consumers again consider the current situation appropriate for buying consumer durables (balance 5 pts. up). Compared to April the overall consumer confidence indicator significantly increased and thus reached the highest value since June 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: 19 May 2004
End of data processing: 24 May 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.