Business cycle survey - November 2006

The balance of composite confidence indicator (indicator of economic sentiment) decreased by 0,7 points in November 2006 compared to the previous month; the balance of business indicator increased slightly (by 0.1 point) and reached the highest value in its history again. The balance of consumer confidence indicator decreased by 3.6 points. Compared to November 2005, the composite confidence indicator balance increased by 5.4 points, the business confidence indicator balance by 7.4 points and the consumer confidence indicator balance decreased by 2.8 points.
In industry, the confidence indicator balance increased by 0.3 points month-on-month and by 6 points year-on-year. In construction, the confidence indicator balance was down by 2 points
m-o-m but up by 2 points y-o-y. In trade, the confidence indicator balance decreased by 2.6 points m-o-m and 5.6 points y-o-y. In selected services, the confidence indicator balance was up by 0.4 points m-o-m and 12.4 points y-o-y.
In industry, respondents assessed their current economic situation the same as in the previous month . The assessment of total demand increased; the assessment of foreign demand did not change. Stocks of finished goods increased slightly, respondents say. For the period of next three months, respondents expect a slight improvement in both production activity and employment. Stable prices are expected by more than 70% of respondents, almost a fifth expect a rise and less than a tenth a drop. For the period of both next three and six months, respondents’ expectations of their economic situation are slightly lower. All in all, the balance of confidence indicator in industry reached its highest value since September 2000.

In construction, assessment of the current economic situation even improved in November in comparison to October, due to the development of construction activity. The assessment of overall demand decreased. Respondents say they have work secured for 9.3 months ahead, on the average. For the period of next three months, the respondents expect a slowdown of construction activity by hardly any changes in employment. Anticipation of no price changes predominates among respondents; more than 16% of them, however, expect a rise in prices. Expectations of economic situation development for the period of next three as well as six months are lower.

Among respondents engaged in trade, assessment of the current economic situation decreased m-o-m in November; 46% of the respondents assessed it as good, half as corresponding to the season and only 3% as bad. According to respondents, stock of inventories decreased slightly in November. A stable development of the number of employees in the period of next three months is expected by almost two thirds of respondents, more than a fifth expect a rise and about 14% a drop. Anticipation of no price changes predominates among respondents; only 4.5% of them expect a rise in prices and 6.6% a drop. Expectations of economic situation development for the period of next three months are higher than in October, however, for the period of next six months they are lower.

In selected services, assessment of both the current economic situation and demand by respondents in November remained almost unchanged. Expectations of demand development for the period of next three months increased. For the period of next three months, a rise in employment is expected by 14.8% of respondents, two thirds expect no changes and about a fifth a drop. Expectations of economic situation development are, compared to October, higher for the period of next three as well as six months.
The survey taken among consumers in November indicates that consumers expect improvement of the overall economic situation (balance up by 2 points) but a decrease in their own financial situation (balance down by 4 points). Compared to October 2006, the percentage of consumers expecting higher unemployment increased slightly. Percentage of the respondents who intend to save money decreased markedly. All in all, the consumer confidence indicator decreased, however, it reached an above-average value.

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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 November 2006
End of data processing: 24 November 2006
Related publication: 1201-06 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 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 indicators 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 basic indices are then re-based to the average of 2005; the data are comparable.