Industrial production fell by 2.7% year-on-year in real terms in November. This more than compensates for the low growth in October. In general, the industry did not fare well in 2023. For the months January to November, we have a 0.4% decline. This is unlikely to change with the December statistics and 2023 will simply go down in history as a year of decline.
Looking at the structure of production, we can see that the largest growth was in the manufacture of basic pharmaceutical products. The current situation in Czech pharmacies, where there is a long-term shortage of something, is clearly evident here. Unfortunately, this industry is not significant in the Czech Republic.
The production of cars is significant in our country. It grew by only 2.1% in November. This is not enough to compensate for the decline in other sectors.
The largest fall of 20% was in the Printing and reproduction of recorded media sector. However, this is an insignificant sector. The significant sector is Manufacture of machinery. It fell by 13.5%. That’s a lot. That is a ball on the foot of Czech industry. This is a sector that used to be steadily growing and has now been declining for several months in a row.
Behind the scenes are mainly Germany’s ongoing problems. Our largest economic partner is now experiencing a weak economy, leading some journalists to label it the sick man of Europe. Indeed, that is what they write about us abroad, which is logical. We are connected to Germany by an umbilical cord. As long as Germany does not prosper, we will not prosper either.
The value of new orders at current prices in November 2023 in the sectors under review rose by 0.2% year-on-year. New orders from abroad increased by 0.8% year-on-year, while domestic new orders fell by 0.9%. This leading indicator suggests that we cannot expect any major trend reversal in the coming months.
The first quarter is likely to remain weak. In the second quarter, however, rising real wages and higher demand could already start to make themselves felt. But it will still not be a big growth.
In international comparison, our development is not bad. The EU as a whole is worse off. According to data published by Eurostat, industrial production in the EU27 fell by 5.5% year-on-year in October 2023, while Czech industry grew by 1.9% at the same time. For the record, Slovak industry fell by 1.7% at the same time, according to Eurostat.
Construction output in November was down 6.5% year-on-year.
Building authorities issued 11.7% fewer building permits year-on-year and the indicative value of these permits rose by 0.2%. Year-on-year, 40.7% fewer dwellings were started and 19.2% fewer dwellings were completed.
These are crazy numbers. The property market has frozen. People can’t get a mortgage, or are discouraged by high interest rates when they correctly expect interest rates to fall during 2024 and 2025. Supply is similarly down. To the latter, current prices seem low. The freeze is therefore due to the fact that there is neither demand nor supply.
This is reflected in the fact that in the first eleven months of the year, housing starts fell by 15.4% and completions by 4.5%. Here I expect an improvement during 2024. Firstly, more people will be able to access mortgages thanks to the removal of some regulations, and secondly because mortgage rates will fall a little further. This should boost demand from people who really want to buy property. Supply will respond to this. The price of property will rise a little and owners will be willing to sell. But it will only be gradual. This unfreezing process will continue throughout the year.
The international comparison is also interesting. Across Europe, we are seeing poor results. According to Eurostat, construction output in the EU27 fell by 0.4% year-on-year in October 2023. The problem everywhere is weak demand, driven by high interest rates and the expectation of falling interest rates.
Source: ČSÚ and CTK
