Business cycle survey - November 2007

In November 2007, the balance of composite confidence indicator (economic sentiment indicator) decreased by 1.6 point compared to October 2007; namely due to the decrease in consumer confidence indicator. The balance of business indicator fell by 0.4 point. The balance of consumer confidence indicator decreased by 6.6 points. Compared to November 2006, the composite confidence indicator balance dropped by 1.9 point, the confidence of entrepreneurs is 0.3 point down; the confidence of consumers is down by 8.6 points.
*) With the exception of consumer indicator, all the data are calculated from seasonally adjusted balances.

In industry, the assessment of overall economic situation improved slightly in November and so did the assessment of production activity. However, the assessment of both total and foreign demand decreased. According to respondents, stocks decreased as well. For the next three months respondents expect a moderate slowdown of production activity and slight decrease of employment. For the next three as well as six months, expectations of economic situation are higher. Overall, the balance of confidence indicator in industry decreased, m-o-m, (by 0.3 point) and it reaches above-average values. It is 1.7 points up, y-o-y.

In construction, the assessment of the current economic situation markedly improved, m-o-m, as well as the assessment of total demand. For the period of the next three months respondents expect favourable development of construction activity and employment. Respondents estimate they have work secured by contracts for 8.6 months ahead. Expectations of the economic situation development for the period of the next three months are better than in October, for next six months they are almost the same. Overall, the confidence indicator balance in construction increased markedly m-o-m (by 5.5 points) due to the assessment of demand; which is 0.5 point up, y-o-y.

In trade, the assessment of the current economic situation improved again compared with October. According to respondents, the finished goods stocks decreased slightly in November. Expectations of the economic situation development for the period of the next three as well as six months were lower compared to October. Overall, the confidence indicator balance decreased by 0.4 point in November; yet it still reaches high values. It is 8.6 points up, y-o-y.

In selected services, according to respondents, the assessment of current economic situation decreased in November. The assessment of demand decreased slightly as well; its expectations for the period of the next three months are, however, the same as in October. Also the expectations of the economic situation development for the period of the next three as well as six months are as favourable as in October. Overall, the confidence indicator balance in selected services decreased due to the assessment of current situation by 1.4 points, m-o-m. It is by 4.4 points down compared to November 2006.

The survey taken among consumers in November indicates that, compared to October, consumers expect for the next twelve months worsening of the general economic situation and namely of their own financial standing. Long-term favourable expectations of unemployment worsened as well. The percentage of respondents planning to save money decreased. Respondents expect rise in prices but still they plan to improve or buy a flat or a house. The consumer confidence indicator decreased by 6.6 points compared to the previous month. It is 8.6 points down, y-o-y, which is the lowest value since October 2004.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: 20 November 2007
End of data processing: 23 November 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 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.