Business cycle survey - October 2005

The composite confidence indicator balance increased in October 2005 by 2 points month-on-month, namely due to the business confidence indicator balance, which increased by 3 points and thus reached the second highest value in its history (since 1993). On the contrary, the consumer confidence indicator balance decreased by 2 points. In comparison to October 2004, the composite confidence indicator balance was by 3 points higher; the business confidence indicator balance was by 2 points higher and the consumer confidence indicator balance was higher by 7 points.

In industry (909 respondents), 49.7% of the respondents considered their economic situation in October good, 47.3% satisfactory and 3.0% bad, which is after seasonal adjustment the same assessment as in September. Assessment of current total demand (order books) for enterprise output did not change compared to the assessment in September. Assessment of current external demand decreased compared to September (balance 4 points down) and returned to its August value. Stocks of finished goods decreased, the respondents say (balance 5 points down). For next three months, 35.8% of respondents expect an increase in the production activity, 59.5% expect no changes and 4.7% a decrease, which after seasonal adjustment translates into a 7-point increase in the balance. Respondents expect the employment to decrease compared to September (balance 4 points down). All the data are seasonally adjusted. The production capacity utilization in manufacturing industry increased compared to the previous quarter and reached 87%, which is historically the highest value (since 1993).
On the whole, the balance of confidence indicator for industry increased by 4 points compared to the previous month; however, in terms of year-on-year comparison, it was 1 point down on October 2004.
In construction enterprises (547 respondents), 51.0% of the respondents considered the economic situation of their enterprise in October good, 44.7% satisfactory and 4.3% bad, which is slightly better assessment than in September (balance 1 point up). Assessment of current total demand (order books) for enterprise output increased (balance 1 point up). For next three months, respondents expect the employment to increase (balance 3 points up). All the data are seasonally adjusted. For next six months, 70.9% of the respondents anticipate no changes in the economic situation (68.5% in September), 11.1% predict improvement (18.0% in September) and 18.0% expect worsening (13.5% in September); however, the seasonally adjusted balance did not change. Generally, the balance of confidence indicator for construction increased by 2 points month-on-month and is 9 points up on October 2004.
Among respondents engaged in trade (311 respondents), 47.7% considered the economic situation of their enterprise in October good, 48.4% as corresponding to the season and 3.9% bad. In terms of month-on-month comparison and seasonally adjusted, this translates into a 4-point increase in the balance. On the whole, trade did not change its stock of inventories. Unchanged price development is expected by 82.1% of the respondents, while 11.0% expect prices to grow and 6.9% to drop. For next six months, 40.6% of the respondents predict improvement in the economic situation (44.2% in September), 58.1% anticipate no changes (55.0% in September) and 1.3% expect worsening (0.8% in September). For next three months 68.2% of the respondents expect a rise in sales, 23.6% no changes and 8.2% a drop. The overall balance of confidence indicator for trade increased by 1 point month-on-month and in terms of year-on-year comparison it is the same as in October 2004.
In selected services (779 respondents), 56.7% of the respondents assessed their current economic situation in October as good, 41.7% as corresponding to the season and 1.6% as bad, which was a lower assessment than in September. 39.4% of the respondents expect the demand (order books) to rise, while 53.2% anticipate no changes and 7.4% assume that the demand will decrease; these expectations are also lower than in September. According to 94.3% of the respondents no changes in price development should occur, 4.5% envisage a rise in prices and 1.2% a drop. The number of employees is expected to decrease (27.0% of the respondents), remain unchanged (64.5%) or to increase (8.5% of the respondents). The overall balance of confidence indicator for selected services decreased by 4 points in October (from its high value in September) and in the year-on-year comparison it is 1 point down.
The survey taken among consumers (1,000 respondents) in October suggests a decrease in the balance of the indicator of expected overall economic situation (balance 5 points down) and no changes in the balance of their financial situation in next twelve months. Compared to September 2005, the percentage of consumers expecting higher unemployment decreased (balance 3 points down). The percentage of the respondents going to save money decreased, too (balance 6 points down). The overall consumer confidence indicator decreased by 2 points in comparison to the previous month, but it is 7 points up year-on-year.

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Note

Contact: Marie Hörmannová, phone (+420) 274052049,
e-mail hormannova@gw.czso.cz
Data source: CZSO business survey, GfK Praha consumer survey
End of data collection: 19 October 2005
End of data processing: 25 October 2005
For more information see: https://csu.gov.cz


Methodological explanatory notes :

The composite confidence indicator is a weighted average of seasonally adjusted confidence indicators for industry, construction, trade, and of the consumer confidence indicator. The composite business confidence indicator is a weighted average of seasonally adjusted confidence indicators for industry, construction and trade. The confidence indicator for industry has a double weight. Since January 2002, the consumer confidence indicator has been composed of four indicators (expected financial situation of consumers, expected overall economic situation, expected total unemployment (with inverted sign) and savings expected in next 12 months). Since January 2003, the confidence indicators have been presented as basic indices, the base being the average of 1995.

The branch confidence indicators are constructed as averages of seasonally adjusted weighted business cycle balances. The business cycle balance is the percentage difference between the responses “growth (+)” and “fall (-)”. The confidence indicator for industry is the average of seasonally adjusted balances of three indicators (assessment of total demand, stocks of finished products (with inverted sign) and expected development of production activity). The confidence indicator for construction is the average of two indicators (assessment of total demand and expected development of employment). The confidence indicator for trade is the average of three indicators (assessment of economic situation, stocks (with inverted sign) and expected development of economic situation). The business cycle survey in selected services has been conducted by the CZSO since May 2002. This is why the time series are not seasonally adjusted. Data for hotels and restaurants are included in selected services. The time series are converted and the data are comparable. The confidence indicator for selected services is the average of three indicators (assessment of economic situation, assessment of demand and expected demand). The confidence indicator for selected services is not yet being included in the composite indicators.

The data were derived in a weighted manner: sales were used as weights for industry, trade and services, whereas construction work of contractors and subcontractors was the weight for construction. The observed groups of enterprises account for more than a half of sales (industry) and volume (construction) and for a quarter of sales in trade.