Business cycle survey - October 2006

The balance of composite confidence indicator (indicator of economic sentiment) increased by 1 point in October 2006 compared to the previous month and thus reached the second highest value in its history. The balance of business indicator increased by 0.7 points and thus reached the highest value in its history. The balance of consumer confidence indicator increased by 2.5 points. Compared to October 2005, the composite confidence indicator balance increased by 5.4 points, the business confidence indicator balance by 4.9 points and the consumer confidence indicator balance increased by 6.9 points.
In industry, the confidence indicator balance increased by 2 points month-on-month and by 3.3 points year-on-year. In construction, the confidence indicator balance was down by 0.5 points
m-o-m but up by 1.5 points y-o-y. In trade, the confidence indicator balance did not change m-o-m and decreased by 0.4 y-o-y. In selected services, the confidence indicator balance was down by 0.7 points m-o-m and up by 8.6 points y-o-y.

In industry, assessment of the current economic situation increased slightly in October compared to the previous month . The assessment of total demand increased as well as the assessment of foreign demand. Stocks of finished goods decreased, respondents say. For next three months, respondents expected growth of both production activity and employment. Stable prices were expected by 73.1% of respondents, 18.0% expected a rise and 8.9% a drop. The respondents expected improvement of their economic situation in both next three and six months. Production capacity utilization in manufacturing industry increased slightly compared to the previous quarter and reached 87.3%, the highest value in its history.

In construction, assessment of the current economic situation remained unchanged in October in comparison to September; the assessment of overall demand improved. For next three months, the respondents expected growth of construction activity and a decrease in employment. Anticipation of no price changes predominates among respondents, according to 83.6% of them. They say they had work secured for 9.7 months ahead. Expectations of economic situation development for next three months were slightly lower, for next six months higher.

Among respondents engaged in trade, assessment of the current economic situation did not change m-o-m in October. Expectations of economic situation development for next three as well as six months were lower than in September. According to respondents, stock of inventories hardly changed in October. Respondents expected increase of sales for next three months. A stable development of the number of employees was expected by 66.7% of respondents, a fifth expected a rise and 13.3% a drop. A rise in prices was expected by 7.0% of respondents, 82.6% expected no changes and 10.4% a decrease.

In selected services, according to respondents, assessment of both the current economic situation and demand increased slightly in October. However, expectations of demand development for next three months decreased. For next three months, a rise in employment was expected by 14.0% of respondents, 65.6% expected no changes and 20.4% a drop. Expectations of economic situation were lower for next three as well as six months.

The survey taken among consumers in October indicated that consumers expected deterioration of the overall economic situation (balance down by 2.9 points) and increase in their own financial situation (balance up by 1.9 points). Compared to September 2006, the percentage of consumers expecting higher unemployment decreased (balance down by 2.1 points). Percentage of the respondents who intend to save money increased by 8.8 points. The consumer confidence indicator increased by 2.5 points in comparison to September.

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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: 20 October 2006
End of data processing: 24 October 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.