Business cycle survey - May 2006

Balance of composite confidence indicator (indicator of economic sentiment) increased by 1.6 point in May 2006 compared to the previous month and reached its highest value since January 1998. Balance of business indicator increased by 1.4 point; balance of consumer confidence indicator increased by 2.4 points. Compared to May 2005, the composite confidence indicator balance increased by 4.2 points, business confidence indicator balance by 4.5 points and consumer confidence indicator balance by 3.1 points.
In industry, the confidence indicator balance increased by 1.4 point month-on-month and in the year-on-year comparison it is 5.7 points up on May 2005. In construction, the confidence indicator balance increased by 0.5 point m-o-m; it is 1.5 point up on May 2005. In trade, the confidence indicator balance decreased by 1.3 point and it is 0.7 point down y-o-y. In selected services, the confidence indicator balance increased by 2.0 points m-o-m and it is 4.4 points up y-o-y.

In industry, favourable assessment of the current economic situation continued in May. The assessment of total demand slightly increased compared to the previous month as well as the assessment of foreign demand. For next three months, respondents expect a stable level of employment. The expected increase in production activity is favourably reflected in the confidence indicator that was rising for four successive months. Stable price development is expected by 80.5% of respondents, 15.4% expect a rise and 4.1 a drop. For next three months, respondents expect a slight decrease in their economic situation; however, for next six months, they expect improvement.

The survey on investment activity suggests that the level of investment in manufacturing industry in 2006 should be higher than in the previous year (approximately by 5%). It regards both: renewal of original equipment or operation as well as extension of production capacities.

In construction, favourable assessment of current economic situation continued in May, even though the seasonally adjusted balance decreased by 3 points m-o-m. For next three months, the respondents expect, in relation to the contracted orders and demand, an increase in the number of employees and a rise of construction activity. Predominantly, the respondents anticipate no changes in prices; however, 23.5% of respondents expect an increase in prices. Construction work is secured for 9.5 months ahead, respondents in construction say. Expectations of economic situation development are favourable for both: next three and six months.

Among respondents engaged in trade, assessment of current economic situation increased in May. Expected development of economic situation for next six months is favourable, although the balance decreased by 1 point m-o-m after seasonal adjustment. According to respondents, stock of inventories increased in May, which negatively affected the value of confidence indicator that decreased for the third time in a row. 81.1% of respondents expect stable development of the number of employees, 14.5% expect a rise and 4.4% a drop. A rise in prices is expected by 8.6% of respondents, 82.2% expect no changes and 9.2% a decrease.

In selected services, respondents assess their current economic situation favourably. Assessment of demand increased in May. Expectations of development of the demand for next three months are cautious. Respondents expect employment to increase; prices of services should not change (a price increase is expected by 5.0% of respondents, no changes by 94.2%). Expectations of economic situation decreased for next six months.

The survey taken among consumers in May indicates that they expect improvement of both the overall economic situation (balance up by 2.4 points) and their own financial situation (balance up by 1 point). Compared to April 2006, the percentage of consumers expecting higher unemployment decreased (balance down by 2.3 points). Percentage of the respondents, who are going to save money increased by 3.8 points. All in all, the consumer confidence indicator increased by 2.4 points and reached the highest value since January 1998.

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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: 22 May 2006
End of data processing: 24 May 2006
More information at: 1201-05 Business Cycle Survey in Enterprises of Industry, Construction,
Trade and Selected Services


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. 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 is being used : confidence indicator in industry has 40% weight, in construction and trade it is 5% each, in services 30% and consumer confidence indicator has 20% weight. Indicators are presented as basic indices, with the average of 2005 as a base.

Time series of composite and business confidence indicators are recalculated by the new weighting system – back to May 2002 (the beginning of the business cycle survey in selected services). Whole time series of basic indices are then recalculated to the average of 2005; data are comparable.