Business cycle survey - May 2008

In May 2008, the balance of composite confidence indicator (economic sentiment indicator) decreased by 2.4 points compared to April 2008. Business confidence indicator balance decreased by 2.3 points and the balance of consumer confidence indicator by 3.2 points. Compared to May 2007, the composite confidence indicator balance dropped by 5.1 points, the confidence of entrepreneurs is 6.1 points down; the confidence of consumers is down by 1.4 point.
*) With the exception of consumer indicator, all the data are calculated from seasonally adjusted balances.

In industry, the assessment of current overall economic situation increased in May compared to April. The assessment of total demand decreased slightly in May; the assessment of external demand increased a little. According to respondents, stocks decreased. For the next three months respondents expect a slowdown in production activity and a moderate decrease in employment; overall, expectation of no changes prevails. For the next three as well as six months expectations of total economic situation are lower than in April. Overall, the confidence indicator balance in industry decreased by 2 points, m-o-m, being 6.3 points down compared to May 2007.

The survey on investment activity suggests that the level of investment in manufacturing industry in 2008 should be slightly higher than in the previous year (approximately by 6%). It regards both: renewal and modernization of the original equipment and operations as well as extension of production capacities.

In construction, the assessment of current economic situation in May decreased m-o-m. The assessment of current total demand did not change. For the period of the next three months respondents expect more rapid development in construction activity and favourable development in employment. Respondents estimate they have work secured by contracts for 9 months ahead. Expectations of the economic situation development for the period of the next three months are slightly lower than in April, for the next six months they are higher. Overall, the confidence indicator balance in construction did not change, m-o-m, to record the third highest value in its history. It is 5.5 points up, y-o-y.

In trade, favourable assessment of current economic situation decreased in May. Expectations of the economic situation development for the period of the next three as well as six months increased slightly. According to respondents, in May the finished goods stocks decreased. Overall, the confidence indicator balance decreased by 1.7 point, m-o-m, and is 3.7 points down, y-o-y.

In selected services, according to respondents, the assessment of current economic situation decreased, m-o-m. The assessment of demand decreased too, m-o-m, and its expectations for the period of the next three months showed no changes. Expectations of the economic development for the period of the next three months decreased slightly, for the period of next six months it is higher than in April. Overall, the confidence indicator balance in selected services decreased by 3 points, m-o-m, and is 8 points down, y-o-y.

The survey taken among consumers in May indicates that, compared to April, consumers expect for the next twelve months worsening of the overall economic situation and their own financial standing as well. In May, the share of consumers expecting a rise in unemployment decreased. The percentage of respondents planning to save money dropped. The consumer confidence indicator decreased by 3.2 points, m-o-m, and by 1.4 point, y-o-y.

---

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 2008
End of data processing: 27 May 2008
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 seasonally non-adjusted 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.