The Czech economy was pulled up by foreign trade in February. According to data published today by the Czech Statistical Office (CSO), its surplus was 2.2 billion higher year-on-year, amounting to 22.5 billion crowns. On the other hand, industry fell 2.6 percent in February after January’s year-on-year growth, and construction output accelerated its year-on-year decline to 11 percent. According to analysts, their results were affected by the development of the coronavirus epidemic and the related government measures or uncertainty about future developments. In addition, the current wave of the epidemic has lower effects on the Czech Republic’s trade with foreign countries than the first wave last spring, analysts told ČTK said. In the coming months, however, the industry is expected to recover, and the construction industry should return to growth next year.
The CZSO announced today that the industry went into a year-on-year decline of 2.6 percent in February from growth of 0.3 percent in January, according to which the production of cars, electrical equipment and building materials performed worse. However, companies concluded more new orders than last year. The value of new orders rose by 6.7 percent year on year. New orders from abroad were higher by 8.9 percent and domestic orders by 1.5 percent.
According to analysts, the decline in the industry was due to complications in transport and in the supply of components for automotive production. “The industry has not yet built on the strong end of last year. This is largely due to problems in the subcontracting chain, where carmakers in particular lack the necessary semiconductors and have had to reduce production of some models,” said ING Bank analyst Jakub Seidler. ČSOB analyst Petr Dufek added that with the improvement of supply, a faster start of production can be expected. Both assume that the industry could return to year-on-year growth in March.
According to Deloitte analyst David Marek, the favorable economic situation abroad is also a hope for Czech industry. Although economic growth in the euro area is not as fast as expected, the US economy can look forward to a strong fiscal stimulus and the Asian economy is maintaining a solid pace. Although Czech companies export mainly to the eurozone, final production with Czech added value often ends in the USA or Asia, he noted.
Analysts are not so optimistic about the development of the construction industry, they expect a decline of around six percent for the whole of this year. February’s results were even worse than expected. According to the CZSO, construction output fell by 11 percent year on year after adjusting for calendar effects and without adjusting for calendar effects, which is the most significant year-on-year decline since July 2016. In January, it fell by 7.7 percent without adjusting for calendar effects and 5.2 percent after adjusting for calendar effects.
In February, building construction, which includes the construction of flats, offices or warehouses, was unsuccessful. Its production was 13.8 percent lower year on year. Komerční banka analyst Martin Gürtler said that the main culprits are anti-epidemic restrictions and increased uncertainty about further developments, which leads to a reduction in companies’ investments in production. On the other hand, infrastructure construction, especially transport construction, increased by 0.8 percent year on year. According to Trinity Bank analyst Lukáš Kovanda, the state is lagging behind the promise to invest in the crisis.
“In construction, however, the uncertainty resulting from the pandemic situation, which leads construction entrepreneurs, construction companies and developers to suspend and cancel some projects, is more difficult than in other sectors,” Kovanda added.
The results of the February foreign trade balance of the Czech Republic were positively affected by a smaller deficit in trade in refined petroleum products and in oil and natural gas. According to the CZSO, year-on-year comparisons increased by 3.8 percent to CZK 309.8 billion and imports by 3.3 percent to CZK 287.3 billion. For example, according to economist Jana Steckerová, these results lagged behind the estimates of Komerční banka’s analytical team. However, Deloitte economist Václav Franče reminded that specifically, car exports were at the same level as last February. However, compared to the end of 2020, it was at a lower level, probably due to the failure of semiconductor chips, he noted. UniCredit Bank economist Jiří Pour added that car exports have stabilized only slightly below the level typical of the pandemic, and data for new vehicle registrations suggest some recovery in demand from key trading partners. He considers it positive that the significant impact of Brexit on trade between the Czech Republic and Britain has not yet been seen.
Source: CTK and CSO
