Business cycle survey - May 2005
Confidence of consumers markedly increased
Publication Date: 26. 05. 2005
Product Code: r-1201-05
The composite confidence indicator balance did not change in May 2005 compared to the previous month; the business confidence indicator balance decreased by 1 point, while the consumer confidence indicator balance increased by 5 points. In comparison to May 2004, the balance of composite confidence indicator was lower by 1 point; the business confidence indicator balance was lower by 4 points and the balance of consumer confidence indicator was higher by 10 points.
In industry (932 respondents), 36% of the respondents considered their economic situation in May good, 61% satisfactory and 3% bad, which is after seasonal adjustment a worse result than in April (balance 2 points down). The assessment of current total demand (order books) for enterprise output decreased compared to the assessment in April (balance 4 points down). The assessment of current foreign demand decreased, too (balance 1 point down). Stocks of finished goods increased, the respondents say (balance 4 points up). In next three months, the respondents expect the production activity to speed up (balance 4 points up) and foreign demand to increase (balance 2 points up). The employment will decrease, the respondents say (balance 1 point down). In next six months, they expect their economic situation not to change. All the data are seasonally adjusted.
On the whole, the balance of confidence indicator in industry decreased by 2 points compared to the previous month. Compared year-on-year it is 3 points down on May 2004.
In construction enterprises (553 respondents), 49% of the respondents considered the economic situation of their enterprise in May good, 47% as satisfactory and 4% bad; this translates into a decrease in comparison to April after seasonal adjustment (balance 5 points down). The assessment of current total demand (order books) for enterprise output did not change. For next three months respondents expect after seasonal adjustment the construction activity not to change with the employment growing (balance 2 points up). In next six months, the respondents expect their economic situation to improve (balance 11 points up) – all seasonally adjusted. Generally, the balance of confidence indicator in construction increased by 1 point month-on-month, however it is 8 points down on May 2004.
Of respondents engaged in trade (330 respondents), 44.5% considered the economic situation of their enterprise in May good, 51.4% as corresponding to the season and 4.1% bad. Month-on-month, this translates into no changes in the balance after seasonal adjustment. All in all, trade decreased its stock of inventories (balance 5 points down). Unchanged price development is expected by 88.9% of the respondents, while 5.4% expect prices to grow and 5.7% to drop. In next six months , 44.7% of the respondents predict improvement in the economic situation (42% in April), 53.9% anticipate no changes (54% in April) and 1.4% expect worsening (4% in April). The overall balance of confidence indicator in trade increased by 2 points both in month-on-month and year-on-year comparison.
In selected branches of services (790 respondents), 60.4% of the respondents assessed their current economic situation in May as good, 37.8% as corresponding to the season and 1.8% as bad, which was a better assessment than in April. 40.5% of the respondents expect the demand to rise (order books), while 56.9% anticipate no changes and 2.6% assume that the demand will decrease; this expectation is better than in April. According to 89% of the respondents no changes in price development should occur, 10.3% envisage a rise in prices and 0.7% a drop. The number of employees is expected to decrease (26% of the respondents), remain unchanged (63%) or increase (11% of the respondents). The overall balance of confidence indicator in selected branches of services increased by 2 points, but in the y-o-y comparison it is 4 points down on May 2004.
The survey taken among consumers (1,000 respondents) in May suggests an increase in the balance of the indicator of expected overall economic situation (5 points up) and an increase in the balance of their financial situation in next twelve months (balance 3 points up). Compared to April 2005, the percentage of consumers expecting higher unemployment decreased (balance 13 points down). The percentage of the respondents going to save money did not change. The overall consumer confidence indicator increased in comparison with the previous month (5 points up) and in the y-o-y comparison it is 10 points up. The balance of consumer confidence indicator has thus reached the highest value since April 2001.
Contact: Marie Hörmannová, phone (+420) 274052049,
e-mail hormannova@gw.czso.cz
Data source: CZSO business surveys, GfK Praha consumer survey
End of data collection: 20 May 2005
End of data processing: 24 May 2005
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 CZSO since May 2002. This is why the time series are not seasonally adjusted. Data for hotels and restaurants are included in 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.