Development of the industry - 4. quarter of 2008

Development of industry in Q4 2008 showed the steep drop of production, sales and orders accompanied by growing unemployment and falling labour productivity. Growth was reported only for wages.
The main factor contributing to the downturn of industry was a dramatic drop of external demand, which showed especially in automobile industry. It is generally accepted that industrial sectors contributing massively to the economic growth over the last years are now pulling the industry down.


Industrial production

Industrial growth in total and its dynamics

The year-on-year industrial production index in Q4 2008 reached 86.8%, and 88.0%, working days adjusted. There were 2 working days less in Q4 2008 compared to the same period in 2007. Seasonally adjusted industrial production index stood at 86.8%. Compared to the y-o-y production growth rate in Q3 2008 the dynamics of industrial production growth dropped sharply.

Development of individual branches and main industrial groupings

The following contributed most to the drop of industrial production: 'manufacture of transport equipment' (its contribution to the industrial drop in total was -4.8 percentage points, drop by 22.3%), 'manufacture of basic metals and fabricated metal products' (contribution –2.2 p.p., drop by 19.7%), 'manufacture of electrical and optical equipment' (contribution -1.6 p.p., drop by 8.2 %).

Industrial production increased only in 'manufacture of coke, refined petroleum products and nuclear fuel‘ (contribution 0.6 p.p., growth 21.5%) whose results were affected by extraordinary low comparable basis in the previous year (outage of production equipment).

In Q4 2008 industrial production dropped in all leading industrial groupings: consumer durables ( 20.9 %), capital goods ( 17.2%), intermediate goods ( 13.0%), consumer non-durables (by 8.0%) and power production (by 1.3%).


Sales

Growth and dynamics

Sales in industry at constant prices decreased in Q4 2008 by 13.4 %, year-on-year, working days adjusted by 12.3 % and by 13.6%, seasonally adjusted. At current prices, sales fell by 12.9%, year-on-year.

The following contributed most to the drop of sales in industry: 'manufacture of transport equipment' (contribution –5.0 p.p., growth by 22.3%), 'manufacture of basic metals and fabricated metal products' (contribution –1.8 p.p., drop by 18.6%) and 'manufacture of electrical and optical equipment' (contribution –1.5 p.p., drop by 8.2%). Sales in industry increased only in 'manufacture of coke and refined petroleum products' (contribution 0.2 p.p., growth by 9.9%).Direct export sales and sales of foreign-controlled enterprises

Direct export sales of industrial enterprises dropped Q4 2008 by 13.8% at constant prices and by 16.9% at current prices. Their contribution to total sales of industrial enterprises made 45.4 % and compared to Q4 2007 it fell (from 47.6 %). The biggest drop at constant prices by volume of sales was recorded in 'electricity, gas and water supply' (by 48.5%), 'manufacture of transport equipment' (by 21.8 %), 'manufacture of basic metals and fabricated metal products' (by 20.5%) and 'manufacture of textiles and textile products' (by 20.3%).

Sales in industry implemented by foreign-controlled enterprises recorded a drop. They decreased by 15.0 % at constant prices (by 14.6% at current prices). Their share in total sales at current prices made 57.2% while compared with Q4 2007 it decreased (from 58.4%). 58.7% of sales of foreign-controlled enterprises was fed to direct exports.


Employment, wages and labour productivity

Employment

In Q4 2008, employment in industry decreased, year-on-year, by 41.3 thousand persons, i.e. by 3.5 %. The average number of employees in industry was 1 148.2 thousand persons.

Employment decreased most in the following industries: 'manufacture of textiles and textile products' (by 16.6 %), 'manufacture of leather and leather products' (by 10.4%), 'manufacturing n.e.c.' (by 8.3%) and 'manufacture of other non-metallic mineral products' (by 7.8%). Employment grew only in 'manufacture of transport equipment' (by 0.1%).

Foreign-controlled enterprises employed 548.7 thousand persons, i.e. 46.8 % of the total number of employees in industry. Their share moderately increased compared with Q4 2007 when it stood at 45.0 %.

Besides the above number 34.2 thousand persons working in industrial organizations were employed by public employment offices and other companies, (y-o-y drop by 29.8 %) mostly in the following branches: 'manufacture of electrical and optical equipment' (8.9 thousand persons, drop by 38.6 %), 'manufacture of transport equipment' (6.4 thousand persons, drop by 43.6 %) and 'manufacture of basic metals and fabricated metal products' (6.3 thousand persons, drop by 1.2 %).

Wages

In Q4 2008, average monthly wage in industry reached CZK 24 008 and was 5.8 % up, y-o-y.The highest level of wages was recorded for: 'mining and quarrying of energy producing materials' (CZK 36 468), 'manufacture of coke and refined petroleum products' (CZK 35 794) and 'electricity, gas and water supply' (CZK 35 308). The lowest wage level was recorded for: 'manufacture of leather and leather products' (CZK 14 380), 'manufacture of textiles and textile products' (CZK 15 630) and 'manufacturing n.e.c' (CZK 18 789). The biggest growth was recorded in 'mining and quarrying of energy producing materials' (by 16.7 %), 'other mining and quarrying' (by 9.6 %) and 'electricity, gas and water supply' (9.1%).

Average wage in foreign-controlled enterprises was CZK 26 109, i.e. by 8.8 % more than average wage in the industry in total. It grew, year-on-year, by 4.6 %.

Labour productivity

In Q4 2008, labour productivity in industry dropped by 9.3 %, y-o-y. Unit wage costs increased by 16.6%.


New orders

New orders (total)

In Q4 2008, new orders were signed in selected industries and their volume decreased by 26.4%, year-on-year. The biggest drop was recorded in 'manufacture of motor vehicles, trailers and semi-trailers' (contribution –9.7 p.p., drop by 34.1 %), 'manufacture machinery and equipment' (contribution –4.9 p.p., drop by 32.9 %) and in 'manufacture of electrical machinery and apparatus' (contribution –3.5 p.p., drop by 34.4 %).

Non-domestic new orders

In Q4 2008, non-domestic new orders signed in selected industries dropped by 27.9%, y-o-y. The biggest decrease in the number of non-domestic new orders was recorded in: 'manufacture of motor vehicles, trailers and semi-trailers' (contribution –12.1 p.p., drop by 36.8 %), 'manufacture of machinery and equipment' (contribution –4.6 p.p., drop by 29.8 %) and 'manufacture of electrical machinery and apparatus' (contribution –3.7 p.p., drop by 35.3%).

The growth of industry in 2008 was negatively affected by a downturn in Q4, which almost nullified positive results reached in three previous quarters. Compared to 2007 the industrial production, sales and labour productivity showed only less significant changes. Employment and new orders indicator dropped while the average monthly wage increased.

The year-on-year industrial production index in 2008 stood at 100.4% and 100.2%, working days adjusted. Compared to 2007, there were two working days more in 2008. Compared with the y-o-y growth rate in 2007 (index 109.0%) the dynamics of growth showed a significant drop.

The main contributors to the growth of receipts from industrial activity were ‘ manufacture of electrical and optical equipment’ (contribution 1.5 p.p., growth by 9.8%), ‘manufacture of coke and refined petroleum products’ (contribution 0.4 p.p., growth by 10.8 %), 'manufacture of chemicals, chemical products and man-made fibres' (contribution 0.3 p.p., growth by 6.1%) and ‘manufacture of machinery and equipment’ (contribution 0.2 p.p., growth by 2.7%). In contrast, industrial production dropped in: 'food products, beverages and tobacco' (contribution –0.5 p.p., drop by 6.9%), 'manufacture of textiles and textile products' (contribution –0.3 p.p., drop by 12.2%) and ‘manufacture of basic metals and fabricated metal products’ (contribution -0.3 p.p., decrease by 2.5%).

Revenues from industrial activity at constant prices increased by 0.1%, y-o-y , (at current prices they dropped by 0.9%), WDA they fell by 0.1%. The growth of revenues from industrial activity was most contributed to by ‘manufacture of electrical and optical equipment‘ (contribution to the growth of industry in total by 1.3 p.p., growth of industry by 8.1%), 'manufacture of chemicals, chemical products and man-made fibres' (contribution 0.3 p.p., growth by 5.7%), ‘manufacture of machinery and equipment’ (contribution 0.2 p.p., growth by 2.4%), ‘manufacture of coke and refined petroleum products’ (contribution 0.1 p.p., growth by 5.1 %). Revenues from industrial activity dropped most in: 'food products, beverages and tobacco' (contribution –0.5 p.p., drop by 6.9%), ‘manufacture of basic metals and fabricated metal products’ (contribution -0.3 p.p., decrease by 3.2.%) and 'manufacture of textiles and textile products' (contribution –0.2 p.p., drop by 12.4%).

Among individual subsections, the biggest shares in the year 2008 were recorded for ‘ manufacture of transport equipment‘ (17.2% in revenues from industrial activity for industry in total), ‘manufacture of electrical and optical equipment‘ (14.9%) and ‘manufacture of basic metals and fabricated metal products‘ (13.0%).

Direct export sales in the year 2008 grew by 2.2% (constant prices) and dropped by 4.7% (current prices) year-on-year. Their share in total direct export sales (current prices) was 47.4%.

Employment decreased by 1.6 thousand persons, i.e. 0.1%, in comparison to the year 2007. The average monthly wage in the year 2008 reached CZK 22 780 (+8.2%, y-o-y). Labour productivity in industry was up by 0.2 in 2008. Average unit wage costs increased by 8.0%.

In 2008 new orders in selected NACE subsections decreased by 5.9%, year-on-year. The main contributors to the drop of new orders were ‘manufacture of motor vehicles’ (contribution -4.0 p.p., drop by 13.8%), ‘manufacture of machinery and equipment’ (contribution –1.2 p.p., drop by 8.5%) and ‘manufacture of electrical machinery and apparatus’ (contribution –1.1 p.p., drop by 10.7%). New orders increased only in: ‘ manufacture of radio, television and communication equipment and apparatus‘ (contribution 1.3 p.p., growth by 25.3%), and ‘manufacture of fabricated metal products’ (contribution 0.6 p.p., growth by 8.2%), %), 'manufacture of chemicals, chemical products and man-made fibres' (contribution 0.3 p.p., growth by 4.5%) and 'manufacture of medical, precision and optical instruments, watches and clocks' (contribution 0.1 p.p., growth by 3.9%).

New non-domestic orders in selected NACE subsections were down by 8.4% year-on-year. Drop of new non-domestic orders was registered in ‘ manufacture of motor vehicles’ (contribution –5.1 p.p., drop by 15.6%), ‘office machinery and equipment’ (contribution –1.6 p.p., drop by 35.0%) and ‘manufacture of electrical machinery and apparatus’ (contribution –1.0 p.p., drop by 10.2%). Increases of new non-domestic orders were recorded only in ‘manufacture of radio, television and communication equipment and apparatus‘ (contribution 1.4 p.p., growth by 22.4%), ‘manufacture of other transport equipment’ (contribution 0.2 p.p., growth by 12.6%) and ‘manufacture of fabricated metal products’ (contribution 0.2 p.p., growth by 2.3%).