Czech industrial production down by 25% y/y in May, up 13.8% m/m

Czech industrial production down by 25% y/y in May, up 13.8% m/m
The Skoda car factory near the village of Kvasiny.
By bne IntelliNews July 8, 2020

Industrial production, adjusted for working days, in the Czech Republic decreased in real terms by 25.7% year-on-year in May, while seasonally adjusted industrial production increased by 13.8% month-on-month, according to data published by the Czech Statistics Office (CSO) on July 7.

“Czech industrial production increased by 13.8% m/m, which is not surprising as April was affected by broad shutdowns at the main carmaker factories. But the increase was still lower than expected,” said ING chief economist Jakub Seidler. 

The deepest decrease was recorded in manufacture of motor vehicles, trailers and semi-trailers, down by 45.2%, manufacture of rubber and plastic products, dropping by 38.6%, and manufacture of fabricated metal products, down by 24.6% y/y. 

According to PwC partner and expert in advising companies in crisis Petr Smutny, the figures show how dependent the Czech industry is on car production.

“While some main car producers reopened in May, not all were operating at full capacity at the start, and carmaker TPCA [Toyota Peugeot Citroen Automobile] remained closed until the end of May. As such, only a limited improvement in car production was anticipated and the y/y decline in car production was 50% after an 80% slump in April,” Seidler noted, adding that recovery in many other industrial segments was even more limited and the y/y decline in some segments actually accelerated in May.

“Sales from industrial activity at current prices decreased by 28.8% y/y in May. Direct export sales of industrial enterprises decreased at current prices by 32.7%. Domestic sales, which also include indirect export via non-industrial enterprises, decreased at current prices by 23.5%,” commented the director of the CSO’s agricultural and forestry, industrial, construction and energy statistics department, Radek Matejka.

According to Seidler, May's recovery was slower than was hoped for, not only due to some ongoing restrictions, but also because of weaker foreign demand. “Indeed, new foreign orders were 37% lower in y/y terms vs. -45% in April,” he said. 

The value of new orders decreased by 34.7% y/y. Non-domestic new orders fell by 36.8%, while domestic new orders dropped by 29.7%. 

“However, this is not the case only for the Czech Republic, as German industry also lagged expectations in May and signalled that the recovery of industry might be somewhat slower than anticipated earlier,” Seidler added. 

The average registered number of employees in industry posted a decrease of 3.6% y/y in May, with the average gross monthly nominal wage going down by 6.1% y/y.