Czech Republic PMI July 2016

Czech Republic

Manufacturing PMI points to a contraction in July

In July, the manufacturing Purchasing Managers’ Index (PMI)—elaborated by IHS Markit—fell from June’s 51.8 to 49.3. For the first time since April 2013, the index is below the 50-point threshold which separates expansion from contraction in the manufacturing sector. July’s result ended a period of more than two years during which the PMI had been indicating an improvement in operating conditions in the sector.

The index was dragged down by a contraction in output levels, which reflected a drop in finished goods in July. Weak demand and fewer new orders were the contributors to the decrease in manufacturing output. While purchasing activity and pre-production inventories also contracted, employment continued to increase, albeit at a slower rate than seen in the previous 34 months.

IHS Markit commented that, “PMI survey data for July pointed to the worst month for Czech goods producers since March 2013, as the sector slipped back into contraction territory. A number of headwinds returned after long absences to hinder economic performance, including the first declines in both total new orders and production levels for just over three years.”

FocusEconomics Consensus Forecast participants see fixed investment increasing 0.5% in 2016, which is down 0.4 percentage points from last month’s projection. For 2017, panelists expect fixed investment to expand 3.3%.

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Czech Republic PMI Chart

Czech Republic PMI July 2016 1

Note: IHS Markit Manufacturing Purchasing Managers’ Index (PMI). A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction.
Source: IHS Markit.

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