Business cycle survey - October 2008

In October 2008, the balance of composite confidence indicator (economic sentiment indicator) decreased by 5.9 points m-o-m (it was 3.1 points down in September, m-o-m). Business confidence indicator balance fell by 4.3 points and the balance of consumer confidence indicator was down by 12.6 points. Compared to October 2007, the composite confidence indicator balance dropped by 16 points, the confidence of entrepreneurs is 16.5 points down and the confidence of consumers is down by 14 points.
*) With the exception of consumer indicator, all the data are calculated from seasonally adjusted balances.

In industry, the assessment of current overall economic situation dropped in October compared to September. In October, the assessment of both total and external demand decreased markedly. According to respondents, stocks increased. For the next three months respondents expect a slowdown of production activity and decrease in employment. For the next three as well as six months expectations of total economic situation are lower than in September. Production capacity utilization in manufacturing industry decreased compared to the previous quarter and reached 85.3%; respondents estimate they have work secured by contracts for 8.1 months ahead. Overall, the confidence indicator balance in industry decreased by 8 points, m-o-m. It is 25.6 points down, y-o-y.

In construction, the assessment of current economic situation in October decreased, m-o-m. The assessment of current total demand decreased as well. For the period of the next three months respondents, however, expect a favourable development in construction activity and employment to continue. Respondents estimate they have work secured by contracts for 9.1 months ahead. Expectations of the economic situation development for the period of the next three months are lower than in September, for the next six months they are higher. Overall, the confidence indicator balance in construction decreased by 3.5 point, m-o-m, but it is 2.5 points up, y-o-y.

In trade, assessment of current economic situation in October decreased, m-o-m. Expectations of the economic situation development for the period of the next three as well as six months decreased as well. According to respondents, in October, the finished goods stocks decreased, too. Overall, the confidence indicator balance fell by 2.3 points, m-o-m, and is 11 points down, y-o-y.

In selected services, according to respondents, the assessment of current economic situation increased moderately, m-o-m. The assessment of demand and its expectation for the next three months hardly changed. Expectations of economic situation for the period of the next three months increased a little, for the period of the next six months they decreased. Overall, the confidence indicator balance in selected services increased by 0.3 point, m-o-m, and is 8.4 points down, y-o-y.

The survey taken among consumers in October indicates that, compared to September, consumers expect for the next twelve months a decrease in the overall economic situation and worsening of their own financial standing. In October, the share of respondents expecting a rise in unemployment increased substantially. The percentage of respondents planning to save money dropped. The consumer confidence indicator decreased by 12.6 points, m-o-m; it is by 14 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: 17 October 2008
End of data processing: 23 October 2008
Related publication: 1201-08 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.