Czech Republic: Manufacturing PMI moderates in February but remains elevated
March 1, 2018
The manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit moderated to 58.8 points in February, down from 59.8 points in January. Despite the drop, the indicator signaled ongoing expansion in the Czech manufacturing sector; a reading above 50 points indicates expansion, while a reading below 50 points marks a contraction.
Expansion in the manufacturing sector in February was driven by strong growth in output and new orders, both domestically and from abroad. Output expanded at the second-fastest rate in nearly seven years, driven by client demand. Although client demand grew at the slowest pace in three months, it remained elevated, and the strong expansion in export orders reflected robust global demand. However, supply-chain difficulties led to an increase in input prices. Higher input prices were passed on to clients as output price inflation picked up markedly to the quickest pace since April 2011.
Due to the continued increase in client demand, firms increased their payrolls by taking on more staff. This did not, however, prevent an increase in backlogs of work. Moreover, capacity tightness may become a more pressing issue in the months ahead, as a shortage of skilled labor was reported in February. Nonetheless, business confidence remained elevated due to favorable demand conditions and planned investments.
Sian Jones, Economist at IHS Markit, commented:
“The Czech manufacturing sector continued to indicate a strong start to 2018 […]. Meanwhile, sustained sharp increases in output and new business were key driving factors behind robust output expectations towards the year-ahead among Czech manufacturers.”
Czech Republic Fixed Investment Forecast
FocusEconomics Consensus Forecast participants see fixed investment increasing 5.6% in 2018, which is up 0.5 percentage points from last month’s projection. For 2019, panelists expect fixed investment to expand 4.1%.
Author: Jan Lammersen, Economist