Business cycle survey - October 2007

In October 2007, the balance of composite confidence indicator (economic sentiment indicator) decreased by 0.2 point compared to September 2007. The balance of business indicator increased by 0.4 point. The balance of consumer confidence indicator decreased by 2.4 points. Compared to October 2006, the composite confidence indicator balance decreased by 1 point, the confidence of entrepreneurs is 0.2 point up; the confidence of consumers is 5.6 points down.
*) With the exception of consumer indicator, all the data are calculated from seasonally adjusted balances.

In industry, favourable assessment of overall economic situation continued in October. Assessment of total demand improved and so did the assessment of foreign demand. Stocks did not change according to respondents. For the next three months respondents expect a moderate slowdown of production activity and an increase in employment. For the next three months, slight worsening of economic situation is expected; for the next six months there should be no changes. Production capacity utilization in industry reached 89,1% which is a record value in its history. Overall, the balance of confidence indicator in industry increased (by 0.3 point), m-o-m, and by 2.3 points, y-o-y.

In construction, the assessment of the current economic situation modestly increased, m-o-m. The assessment of total demand decreased. For the period of the next three months respondents expect acceleration in construction activity and still count on rise in employment. Respondents estimate they have work secured by contracts for 8.4 months ahead. Expectations of the economic situation development for the period of the next three as well as six months are better than in September Overall, the confidence indicator balance in construction decreased due to the decrease in demand by 0.5 point, m-o-m, and is 7 points down to October 2006.

In trade, the assessment of the current economic situation improved compared with September. According to respondents, the finished goods stocks increased in October. Expectations of the economic situation development for the period of the next three as well as six months were slightly lower compared to September. Overall, the confidence indicator balance decreased by 0.3 point in October; yet it still reaches high values. It is 6.4 points up, y-o-y.

In selected services, according to respondents, the assessment of current economic situation improved in October. The assessment of demand slightly decreased. Its expectations for the period of the next three months are the same as in September. Expectations of the economic situation development for the period of the next three as well as six months are lower than in September. Overall, the confidence indicator balance in selected services increased by 0.7 point m-o-m, however, it is by 2.6 points down compared to October 2006.

The survey taken among consumers in October indicates that, compared to September, consumers expect for the next twelve months improvement of the general economic situation and worsening of their own financial standing. Among consumers, expectations of the drop of unemployment prevailed over expectations of its increase again and thus it reached the second lowest value in its history. The percentage of respondents planning to save money decreased. The consumer confidence indicator decreased by 2.4 point compared to the previous month and is 5.6 points down, 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: 19 October 2007
End of data processing: 23 October 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.