Czech Republic: Economic sentiment weakens in January
January 25, 2011
The economic sentiment index inched down to 95.6 points in January from the 95.8 point peak observed in December. However, the index remains 10.1 points above the level observed in the same month last year. The index sits below its long-term average of 100 points after having fallen below the threshold in June 2008. Values greater than 100 indicate above-average economic sentiment, while values under 100 indicate a below-average position. Both components of the sentiment index (consumer and business sentiment) fell over the previous month. Consumer confidence dropped on the back of consumers' less optimistic assessment about the economic outlook as well as deteriorating expectations of their own financial position. As a result, a higher number of respondents are planning to save more in the months ahead. In addition, the number of respondents expecting improvements in the labour market remained unchanged compared to the previous month. Business confidence also fell, ending three consecutive months of increasing sentiment. The fall mainly reflected weaker confidence in the services sector, on the back of firms' perceptions about sluggish demand. Consequently, respondents also expressed a less upbeat assessment about demand for the next quarter. In addition, respondents were less optimistic about economic prospects for the next six months. Moreover, in the industrial sector businesses reported a negative assessment about current capacity utilization, as a consequence of insufficient demand. However, firms reported optimistic expectations for the economy over the next three months, while expectations for the next six months remained stable. In contrast, business sentiment in both the construction and trade sectors declined over the previous month, amid a less optimistic assessment about the current economic situation.
Author: Ricardo Aceves, Senior Economist