Czech Republic: Manufacturing PMI dips at the start of Q3, but conditions remain fairly expansionary
August 1, 2017
The Manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit In July declined to 55.3 from June’s 56.4, marking the weakest reading so far in 2017. Consequently, the indicator remains comfortably above the 50-point threshold which separates expansion from contraction in the manufacturing sector.
July’s result reflected strong, albeit slower, growth in production and new orders. Output recorded the twelfth consecutive month of expansion, thanks to robust demand from both new and old clients, although the rate of expansion was the slowest so far this year. The pace of growth in new orders decelerated slightly but remained robust overall, pushing businesses to hire more staff and extending the sequence of job creation which began in May 2013. Despite the larger workforce, backlogs of work increased, due partly to higher order volumes in the automobile industry. Regarding price developments, growth in input prices eased but remained strong overall. Higher prices for inputs were passed through to final consumers in the form of higher output prices, although the pace of output price inflation decelerated for the fifth consecutive month.
Sian Jones, Economist at IHS Markit, commented that, “July survey data indicated a continuation of the solid growth seen in the Czech manufacturing sector throughout 2017 so far. Although down on recent highs, the latest PMI reading signals a strong improvement in overall operating conditions, largely driven by expansions in output and new orders. […] The latest IHS Markit forecast places industrial production growth for 2017 at 3.9%, up from 2.9% in 2016, with the manufacturing sector highlighted as a key contributor to expansion.”