Business cycle survey - May 2007

In May 2007, the balance of composite confidence indicator (economic sentiment indicator) increased slightly (by 0.1 point), compared to the previous month. The balance of business indicator increased by 0.4 point and reached high value again. The balance of consumer confidence indicator decreased by 1 point. Compared to May 2006, the composite confidence indicator balance increased by 3.5 points, the confidence of entrepreneurs is by 5.7 points up; the one of consumers is down by 5.4 points.

In industry, the assessment of current economic situation improved slightly compared to the previous month . The assessment of aggregate demand improved as well; the assessment of foreign demand decreased slightly, m-o-m. According to respondents, the finished goods stocks did not change. For the period of the next three months, respondents expect increase in production activity and employment; as for the economic situation, respondents are less optimistic than in April. For the period of the next six months the expectations of economic situation are the same as in April. All in all, the balance of confidence indicator in industry increased by 2.3 points m-o-m and by 6.3 points y-o-y.

The survey on investment activity indicates that the level of investment in manufacturing industry in 2007 should be higher than in the previous year (approximately by 6%). It applies to both: repair and modernization of the equipment or operations as well as the extension of production capacities.

In construction, the assessment of current economic situation decreased m-o-m compared to extraordinarily favourable values of previous months. The assessment of aggregate demand decreased as well. For the period of the next three months, the respondents expect that the reached level of construction activity will remain almost the same and count on increase in employment. Respondents estimate they have work secured by contracts for 9.2 months. Expectations of economic situation development for the period of the next three months are less favourable than in April; for next six months they are higher. All in all, the confidence indicator balance in construction decreased by 1 point m-o-m and is 3.5 points up y-o-y.

Among respondents engaged in trade, assessment of current economic situation improved slightly compared with April. Expectations of economic situation development for the period of the next three as well as six months decreased slightly. According to respondents, the finished goods stocks increased slightly in May. All in all, the confidence indicator balance decreased by 0.7 point m-o-m to the second highest value in its history which is 8.7 points up y-o-y.

In selected services, assessment of current economic situation improved slightly in May, according to respondents. Assessment of demand decreased after previous improvements. Expectations of the demand development for the period of the next three months are, however, slightly higher. Expectations of the economic situation development for the period of the next three as well as six months are higher than in April. All in all, the confidence indicator balance in selected services decreased by 1.7 point m-o-m, but it is by 4.6 points up compared to May 2006.

The survey taken among consumers in May indicates, that consumers expect improvement of both the general economic situation and their own financial standing compared to April 2007. The percentage of consumers expecting higher unemployment, decreased slightly. Percentage of respondents planning to save money decreased markedly. The consumer confidence indicator decreased by 1 point compared to the previous month, and is by 5.4 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: 22 May 2007
End of data processing: 25 May 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.