Czech Republic PMI August 2020

Czech Republic

Czech Republic: Manufacturing PMI signals first improvement in operating conditions in nearly two years

October 1, 2020

The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, increased from 49.1 in August to 50.7 in September, marking the best reading since November 2018. Therefore, the index moved above the critical 50-threshold separating deterioration from improvement in the health of the manufacturing sector.

September’s print largely reflected a stronger expansion in output and the first expansion in new orders in close to two years amid the reopening of business and resumption of client operations. Moreover, although firms continued to lower staff levels, the pace of job shedding was the weakest since June 2019. On the price front, input cost inflation moderated notably in September due to stronger supplier competition, while output charges fell again in a bid to boost sales. Lastly, business sentiment rose to its highest level since October 2018 amid hopes of a stabilization in economic performance.

Commenting on the release, Sian Jones, economist at HIS Markit, stated:

“Despite an uptick in the overall performance of the manufacturing sector, the third quarter is set to see a further decline in overall industrial production from a year earlier. Year-on-year growth isn’t expected to return until the opening quarter of 2021, as uncertainty in the global economy looks set to weigh on demand condition."

Meanwhile, economists at ING commented:

“Czech PMI together with PMIs from the main trading partners, especially Germany, points to some careful optimism. But the second wave of the pandemic will most likely delay the recovery, not only in selected services but most likely in the global industry in the months ahead – meaning September’s optimism may prove to be short-lived.”

Commenting on the release, Sian Jones, economist at HIS Markit, stated:

“Despite an uptick in the overall performance of the manufacturing sector, the third quarter is set to see a further decline in overall industrial production from a year earlier. Year-on-year growth isn’t expected to return until the opening quarter of 2021, as uncertainty in the global economy looks set to weigh on demand condition."

Meanwhile, economists at ING commented:

“Czech PMI together with PMIs from the main trading partners, especially Germany, points to some careful optimism. But the second wave of the pandemic will most likely delay the recovery, not only in selected services but most likely in the global industry in the months ahead – meaning September’s optimism may prove to be short-lived.”

FocusEconomics Consensus Forecast participants see fixed investment contracting 13.3% in 2020, which is down 0.5 percentage points from last month’s projection, before growing 5.5% in 2021.


Author: Massimo Bassetti, Senior Economist

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Note: IHS Markit Manufacturing Purchasing Managers’ Index (PMI). A reading above 50 indicates an improvement in operating conditions while a value below 50 points to a deterioration.
Source: IHS Markit.


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