Business cycle survey - September 2007

In September 2007, the balance of composite confidence indicator (economic sentiment indicator) decreased slightly (by 0.1 point) compared to August 2007. The balance of business indicator increased by 0.2 point. The balance of consumer confidence indicator decreased by 1.5 point. Overall confidence hardly changed m-o-m. Compared to September 2006, the composite confidence indicator balance increased by 0.2 point, the confidence of entrepreneurs is 0.5 point up; the confidence of consumers is 0.7 point down.

In industry, favourable assessment of overall economic situation did not change in September. Most respondents expect no changes in demand, which is reflected in lower assessment of total demand balance. Assessment of foreign demand modestly increased. Stocks did not change according to respondents. For the next three months respondents expect a rise in production activity and no changes in employment. For the next three as well as six months, improvement of economic situation is expected. Overall, the balance of confidence indicator in industry decreased (by 0.3 point) m-o-m and increased by 4 points y-o-y.

In construction, the assessment of the current economic situation did not change m-o-m. The assessment of total demand decreased. For the period of the next three months the respondents expect an acceleration in construction activity and still count on rise in employment. Respondents estimate they have work secured by contracts for 8.3 months ahead. Expectations of the economic situation development for the period of the next three months are worse than in August; for the next six months they are better. Overall, the confidence indicator balance in construction decreased by 0.5 point m-o-m and is 7 points down to September 2006, when it reached the highest value in its history.

Among respondents engaged in trade, the assessment of the current economic situation improved compared with August. According to respondents, the finished goods stocks increased in September. Expectations of the economic situation development for the period of the next three as well as six months were lower compared to August. Overall, the confidence indicator balance dropped from the highest value in its history (reached in August 2007) by 1.3 point in September. It is 6.7 points
up, y-o-y.

In selected services, according to respondents, the assessment of the current economic situation improved slightly in September. The assessment of demand increased as well. Its expectations for the period of the next three months deteriorated slightly in comparison to August. Expectations of the economic situation development for the period of the next three as well as six months are better than in August. Overall, the confidence indicator balance in selected services increased by 1.3 point m-o-m, however, it is by 4 points down compared to September 2006.

The survey taken among consumers in September indicates that, compared to August, consumers expect for the next twelve months worsening of both the general economic situation and their own financial standing. Among consumers, for the fist time, expectations of the drop of unemployment prevailed over expectations of its increase and, consequently, unemployment expectations of consumers are the lowest ever. The percentage of respondents planning to save money increased markedly. The consumer confidence indicator decreased due to lower expectations of households’ financial standing by 1.5 point compared to the previous month and it is 0.7 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: 20 September 2007
End of data processing: 25 September 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 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.